BLBG:Turkish Lira Gains as Central Bank Sells Dollars for Fourth Day
Turkey’s lira headed for the highest level in three weeks as traders said the central bank sold dollars for lira in direct sales for a fourth straight trading day and raised banks’ funding costs.
The lira advanced 0.3 percent to 1.8680 per dollar at 10:58 a.m. in Istanbul, the highest level since Dec. 9. The bank on Dec. 29 began tightening lira liquidity and selling dollars, helping the currency rebound from last year’s 18.4 percent depreciation, the biggest among emerging-market currencies tracked by Bloomberg.
“It is intervening now but it’s not an aggressive one,” said Tufan Comert, a strategist at Garanti Investment. The size of the sale was about $200 million and continuing, he said.
Central Bank Governor Erdem Basci is using Turkey’s foreign currency reserves to halt a decline in the currency that’s driving up import costs and helped push December inflation (TUCPIY) to a 20-month high of 10.5 percent. The dollar sales, coupled with increases to the rate at which banks can borrow from the central bank, are being used to withdraw liras from the market.
The bank today didn’t offer lira funding at the benchmark rate (TUBR1WRA) of 5.75 percent, inviting banks to bid for 3 billion liras in one-week repos. The bank lent 3 billion liras in a similar one-week repo auction yesterday at an average annual rate of 11.86 percent. It hasn’t provided liquidity at 5.75 percent since Dec. 28, after the lira fell to a record low of 1.9224 per dollar earlier in the month.
Yields
Yields on the two-year benchmark note (TRABNBM) fell eight basis points, or 0.08 percentage points, to 11.45, declining from 11.53 percent yesterday, the highest level since July 2009, according to the RBS Istanbul Benchmark Bond Index. lira appreciated 0.3 percent to 1.8896 per dollar. Core inflation declined to 8.1 percent last month from 8.2 percent in November, the statistics agency in Ankara said on its website yesterday.
Turkey’s foreign-exchange reserves (TURWL) declined to $82.8 billion as of Dec. 23, equal to about five months of imports. The reserves are down from a peak of $93.9 billion on July 7, according to data from the central bank.
“The central bank will continue to do whatever it takes to preclude further depreciation of the lira, despite significant FX reserve losses last year,” Haluk Burumcekci, chief economist for EFG Istanbul Equities, wrote in a report after a briefing with Basci yesterday. “Basci said the bank had withdrawn 5.5 billion liras to 6 billion liras through interventions in the last two days, implying $3.2bn for the total amount sold.”
To contact the reporters on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net; Benjamin Harvey in Istanbul at bharvey11@bloomberg.net
To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net
