The lira, the world’s worst- performing currency this month, pared its fourth day of losses after the central bank canceled its dollar-buying auctions and cut foreign-exchange reserve requirements for banks. Turkey’s currency trimmed its decline to 0.9 percent at 1.7129 per dollar as of 12:36 p.m. in Istanbul, after depreciating as much as 2.2 percent in earlier trading today. Yields on benchmark two-year bonds jumped 16 basis points, or 0.16 percentage point, to 8.84 percent, according to a Royal Bank of Scotland Group Plc index. The central bank ended daily purchases of $30 million, according to an e-mailed statement today. It also reduced the reserve requirement for banks on foreign-currency deposits of more than a year by as much as 2 percentage points to 9 percent. The step will give $590 million of liquidity to the market, the Ankara-based bank said. “The lira has probably seen its trough for today but the pressure will continue in the coming days,” Antero Atilla, an emerging-market analyst at Danske Bank A/S in Copenhagen, said in e-mailed comments. “Turkey’s external-deficit problem is not going to disappear on its own and canceling foreign-exchange auctions will provide only a temporary solution.” The lira has weakened 3.3 percent in the past four trading days after Fitch Ratings said an upgrade of Turkey’s credit rating is “uncertain” because of the country’s current-account deficit, and after Central Bank Governor Erdem Basci said on July 22 a free-floating currency helps economic growth. Basci’s comments indicated “almost a green light” for further lira weakness, the Royal Bank of Scotland said last week. Rates The current-account deficit more than doubled to $7.8 billion in May as the bank’s efforts to slow domestic demand failed to trim the imports, the statistics office said July 11. The lira this month has declined against the dollar more than any of 170 currencies tracked by Bloomberg. The central bank left interest rates at a record low of 6.25 percent for a sixth month last week. Instead of raising rates, the bank has increased reserve requirements for the banking industry in an effort to stem the consumer borrowing that’s swelling demand for imports. 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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