Turkish Lira Falls Third Day on Current-Account Deficit Concern

The lira depreciated for a third day in Istanbul, weakening beyond a 1.80 threshold against the dollar, on concern that policy makers will fail to contain a widening current-account deficit.

The lira slumped 0.3 percent to 1.8037 per dollar at 5:16 p.m. in Istanbul, heading for the lowest level since Oct. 21. The currency lost 14 percent this year, making it the second- worst performing emerging-market currency among more than 20 tracked by Bloomberg.

Turkey’s current-account deficit widened to $6.8 billion in September from $3.9 billion a year earlier. Central bank Governor Erdem Basci said Nov. 14 that a weaker lira and a slowing economy had brought the widening gap under control since October. Global stocks and the euro fell as the Bank of England said failure to resolve Europe’s debt crisis may hurt the global economy. Oil topped $100 a barrel in New York for the first time since July on speculation inventories decreased.

“In the current negative market environment, the market resumes its usual dislike of the lira, given the current-account deficit issue and lack of simplicity in monetary policy to combat it,” said Roderick Ngotho, a currency strategist for the region at Royal Bank of Scotland Group Plc.

The Ankara-based bank sold at least $8.7 billion for liras to shore up the currency and tightened liquidity in the market by forcing banks to borrow at overnight interest rates as high as 12.5 percent. The lira has rallied from a record low of 1.9096 per dollar reached on Oct 4. The bank sold $30 million for liras today.

“The central bank action on days of negative risk sentiment is unlikely to be so effective as the market is going the other way,” Ngotho said.

Yields on benchmark two-year bonds climbed one basis point, or 0.01 percentage point, to 10.52 percent, a Turk Ekonomi Bankasi index of the securities showed, the highest level since July 2009.

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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