Bloomberg News

Turkish Lira Strengthens First Day in Five as Spanish Bonds Rise

July 10, 2012

The lira appreciated for the first time in five days, reversing earlier losses, as a rebound in Spain’s bonds lifted risk appetite for emerging-market assets.

The lira appreciated 0.2 percent to 1.8168 against the dollar at 12:54 p.m. in Istanbul, extending its gain this year to 4.1 percent. It weakened as much as 0.3 percent in earlier trading. Yields on two-year benchmark debt were unchanged at 8.02 percent.

Spain’s 10-year yield slid 17 basis points to 6.90 percent, the lowest level since July 6. European governments will jump- start as much as 100 billion euros ($123 billion) in loans to shore up Spain’s banks, Luxembourg Prime Minister Jean-Claude Juncker said after chairing a nine-hour meeting of euro-region finance ministers. The Stoxx Europe 600 Index rose 0.8 percent at 9:50 a.m. in London, and Standard & Poor’s 500 Index futures added 0.2 percent. Turkey sells almost 40 percent of its exports to the European Union, which it seeks to join.

“The global markets are recovering and we are seeing buying in Spanish and Italian bonds after statements from European officials,” Suha Yaygin, deputy head of trading for emerging markets at Toronto Dominion Bank in London, said in e- mailed comments.

The cost of insuring against default on European sovereign debt fell for the first time in five days.

Output Expansion

Industrial production in Turkey expanded in May from a year ago at almost triple the pace that analysts expected as capital goods and non-durable goods output surged.

Output grew 5.9 percent from May 2011, the statistics office in Ankara said on its website yesterday. It was expected to rise 2 percent, according to the median estimate of six economists questioned by Bloomberg. Production expanded an annual 1.8 percent in April.

The central bank lent today at its minimum 5.75 percent policy rate for a 26th consecutive day, the longest stretch of funding at the lowest policy rate since March 21, reducing borrowing costs.

The overnight cost of borrowing dropped to 6.34 percent in the Turkish interbank market, the least on a closing basis since Oct.17 and down from 10.5 at the beginning of this year. Turkey’s economy contracted in the first quarter.

To contact the reporters on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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