The lira weakened for a sixth day, heading for a record low, as the Turkish central bank’s planned dollar sales failed to stem the fallout from a signal to scale back U.S monetary stimulus.
The currency depreciated 0.1 percent to 1.9412 at 11:29 a.m. in Istanbul, its lowest level on a closing basis since at least 1981. Yields on five-year debt jumped 26 basis points, or 0.26 percentage point, to 8.99 percent, the highest level in more than a year, before a sale of similar-maturity debt today.
The central bank will hold a single dollar auction on days it provides funding at its policy rate of 4.5 percent and will sell at least $150 million. That compares with a sale of $350 million in multiple auctions on June 20, when the lira hit its lowest level to date of 1.95 per dollar. Federal Reserve Chairman Ben S. Bernanke said on June 19 the U.S. central bank may curtail its monthly asset purchases as soon as this year, cutting risk appetite for emerging-market debt and currencies.
“The chances are slim that the central bank’s $150 million sale can counter the lira selling pressure in the market at this stage,” Ipek Ozkardeskaya, a currency strategist at Swissquote Bank in Geneva, said in e-mailed comments. “It is strongly probable that the dollar will keep strengthening this week after the Fed meeting.”
Turkey’s borrowing costs have jumped and the lira weakened as anti-government protests broke out at the end of May. Premier Recep Tayyip Erdogan said at a party rally in the central Anatolian city of Kayseri on June 21 the “main opposition will pay price for backing protest.” Turkish people will not bow to artists and writers who are “humiliating” them, he said.
The Treasury is scheduled to sell fixed-rate debt due in 2018 and inflation-linked securities today, followed by two-, seven- and 10-year debt tomorrow, according to a May 31 statement. Turkey is seeking to raise 38.8 billion liras ($20 billion) through August in domestic debt sales, including 13 billion liras this month, the document said. That compares with 17.6 billion liras in the same period last year.
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