Bloomberg News

Lira Strengthens First Time in Five Days on Tighter Funding

July 25, 2012

The lira strengthened for the first time in five days after the central bank lent the least in almost two months in its daily repurchase agreements auction, tightening liquidity.

The Turkish currency gained 0.3 percent to 1.8232 per dollar at 4:58 p.m. in Istanbul, paring its loss this month to 0.8 percent.

The central bank lent 500 million liras ($274 million) in one-week repo today at 5.75 percent, its minimum funding rate. The loan was the smallest amount lent at that rate since June 4. The bank provided 1.5 billion liras yesterday, compared with 2.5 billion liras a week earlier, reducing money supply.

“The market initially reacted because the central bank cut liquidity,” Tufan Comert, a strategist at Istanbul-based Garanti Securities, said in e-mailed comments. “The central bank made this move to prevent excess liquidity in the market as the Treasury has 1.4 billion liras debt redemption today.”

Central bank Governor Erdem Basci introduced an interest- rate corridor in October to execute his monetary policy, alternating between rates of 5.75 percent and 11.5 percent on a daily basis to tame inflation and rein in the current-account deficit by curbing credit growth.

Yields on two-year benchmark bonds fell six basis points, or 0.06 percentage point, to 7.89 percent, retreating for the first time in four days.

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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