Bloomberg News

Turkish Lira Gains Third Day on 21% Trade Deficit Contraction

January 31, 2013

The lira gained for a third day as Turkey’s trade deficit shrunk by 21 percent, spurring expectations the nation’s current-account deficit will extend its narrowing trend.

The currency strengthened 0.3 percent to 1.7928 per dollar at 11:16 a.m. in Istanbul, its highest level on a closing basis since Jan. 18. Yields on two-year benchmark bonds declined three basis points, or 0.03 percentage point, to 5.8 percent, the lowest level since Dec. 18.

The gap tightened to $84 billion in 2012 as exports jumped 13 percent and imports fell 1.8 percent, the Ankara-based state statistics agency said on its website today. The monthly shortfall was $7.18 billion, compared with a median estimate of $9.45 billion in a Bloomberg survey. A widening of the current- account deficit to 10 percent of gross domestic product triggered an 18 percent depreciation in the lira in 2011, the world’s biggest.

“The fall in the current-account deficit will continue in December,” Gizem Oztok Altinsac, an Istanbul-based economist at Garanti Securities (GMBTAHV), wrote in an e-mailed note today. “Following today’s data, we estimate the current-account deficit to $5.2 billion in December, which brings the annual current-account deficit to $50.5 billion.”

The lira rose 1.1 percent this month, the biggest monthly gain since September, extending last year’s 6 percent appreciation against the dollar. Moody’s Investors Service left Turkey’s sovereign credit rating one level below investment grade, saying “further progress” is needed in lowering the current-account gap.

Yields on benchmark bonds dropped 38 basis points in January as the central bank reduced its overnight interest rates by 25 basis points on Jan. 22 on concern the lira may become overvalued. Turkey’s stock and bond markets have attracted inflows on bets of a second upgrade from Moody’s.

Central bank Governor Ercem Basci’s policies helped send the lira’s volatility to the lowest level in more than 25 years, as foreign investors bought more than $24 billion in Turkish stocks and bonds in the past year.

To contact the reporter 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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