Turkey’s Lira Strengthens After Central Bank’s Dollar Sales ‘Stop Panic’
The lira gained in Istanbul trading, indicating that the central bank has stabilized the currency’s value after selling a record amount of dollars in an auction last week.
The lira rose 0.3 percent to 1.8310 per dollar at 11:49 a.m., climbing alongside other emerging market currencies in the region. It advanced 0.1 percent to 2.5289 per euro.
The central bank sold a record $750 million for liras in a daily auction on Oct. 5 in an effort to stem a decline in the lira to a record 1.9096 liras per dollar the previous day. Since then it has reduced the dollar sales as concern about the debt crisis in Europe subsided. The bank announced no sale of dollars for liras today. The lira has lost 16 percent this year, more than any other emerging market currency.
“The sharp increase in the amount of daily dollar sales helped to stop the panic in the market,” Yarkin Cebeci, economist at JPMorgan Chase & Co. in Istanbul, said by e-mail in response to questions. “Flows have stabilized in the last few days and we are not seeing any significant outflows from the emerging markets. Now, people know that the central bank could sell dollars whenever there is a sell-off in the lira. That should help to bring down the volatility.”
The central bank sold $210 million for liras in a total of two auctions this week. Sales each day last week totaled $1.64 billion.
“I think the central bank would rather see the currency a bit stronger but they know that they have to pay a big price in terms of reserve depletion to achieve further strength,” Cebeci said.
The central bank’s foreign exchange reserves declined $2.4 billion in the week to Oct. 7 to $85.1 billion, the lowest level since February, data published yesterday showed.
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