The lira weakened for the first time in three days as a deadline for lenders’ to increase their foreign-exchange reserves approached, boosting the demand for dollars.
The lira depreciated 0.2 percent against the dollar to 1.77 by 11:37 a.m. in Istanbul. It slid for a sixth day versus the euro, falling less than 0.1 percent at 2.3814, its lowest level on a closing basis since March 27.
The central bank increased its reserve requirements on Jan. 22 to tighten Turkey’s credit growth while reducing interest rates to deter capital inflows that are strengthening the lira. The higher ratios will be effective Feb. 1 and the banks will be required to transfer as much as $2.9 billion in foreign exchange and gold by Feb. 15 at the very latest to beef up their reserves.
The “banks are hoarding foreign exchange” because of higher reserve requirements, Bora Tamer Yilmaz, a vice president at Istanbul-based Halk Securities, the brokerage unit of Turkiye Halk Bankasi AS (HALKB), said in e-mailed comments.
Yields on benchmark two-year notes rose for a second day, climbing three basis points, or 0.03 percentage point, to 5.91 percent.
“The increase in yields shows that the market is anxious after the central bank’s tight stance,” Yilmaz said. “The market is looking for an excuse to sell bonds.”
The lira has appreciated 1 percent this year against the dollar, the fourth-biggest gain among emerging-market currencies in Eastern Europe and Africa after the Romanian leu, the Bulgarian lev and the Russian ruble.
The central bank raised its foreign-exchange reserve requirement on liabilities of up to one year by 50 basis points to 12 percent. The ratio on liabilities of up to three years was increased to 10 percent from 9.5 percent.
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