The Turkish currency weakened the most for a week against the euro as Cyprus’s lawmakers debated the measures needed to obtain a bailout.
The lira traded 0.4 percent weaker at 2.3543 per euro as of 2:15 p.m. in Istanbul, the biggest decline among major emerging market currencies in Europe, the Middle East and Africa. The euro appreciated against 15 of its 16 major peers.
“I would attribute this to a general euro strength, rather than lira weakness,” Thu Lan Nguyen, a currency strategist at Commerzbank AG, said in e-mailed comments. “The lira is not as much benefiting from the slightly more optimistic sentiment in Europe as central and eastern European currencies, which are much more closely related to the euro zone.”
Cypriot lawmakers begin a debate today on legislation to unlock the rescue funds needed to prevent a financial collapse. The European Central Bank will withdraw funding from Cyprus’s lenders from Monday if the government and European authorities fail to agree on a deal.
The lira advanced less than 0.1 percent against the dollar at 1.8179 at 2:15 p.m. in Istanbul, boosted by comments from Fitch Ratings about a potential upgrade. Yields on two-year benchmark notes rose one basis point to 6.16 percent.
Fitch Ratings has no requirement to wait for three years for a new upgrade after Turkey was raised to investment ranking in November, state-owned Anatolia news agency reported today, citing an interview with Gulcan Ustay, the head of Fitch Turkey.
“The positive comments by Fitch obviously had only little effect on the lira, as it seems a bit unrealistic that Fitch upgrades Turkey again, while the other two big rating agencies still have a sub-investment grade rating,” Nguyen said.
Moody’s Investors Service rates Turkey one level below investment grade and Standard & Poor’s two levels below.
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