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Turkish Lira Weakens a Second Day as Central Bank Eases Lending in Auction

The lira fell for a second day and headed for its lowest level in six days as the Turkish central bank eased lending in its one-week repo auctions before the biggest monthly debt repayment a year.

The lira weakened 0.2 percent to 1.8329 per dollar at 9:09 a.m. in Istanbul, paring this year’s gain to 3.1 percent. The minimum funding the central bank offers via daily one-week repo auctions will be 25 billion liras ($13.7 billion) until Feb. 2, increasing from a minimum of 7 billion liras during the past two weeks, the Ankara-based bank said on Jan. 21. The Treasury will repay 17.8 billion liras of domestic debt this month, the highest monthly repayment in a year.

“We think that US dollar/Turkish lira may reverse some of its recent strong performance, with Central Bank easing the lira liquidity conditions,” Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS in Istanbul, said in a client note.

The lira performed worse than all currencies worldwide last year as the central bank cut interest rates to a record low of 5.75 percent and the current-account deficit hit 10 percent of gross domestic product, the highest rate among 60 major economies tracked by the International Monetary Fund. The central bank offered to lend 7 billion liras in one-week repo auction at 5.75 percent today, its lowest lending rate.

The Treasury will tap markets today and tomorrow in the second week of auctions this month to borrow 14.4 billion liras in domestic debt, according to a borrowing program published on Dec. 30.

Yields (BENCH) on two-year debt were unchanged at 10.51 percent, a Turk Ekonomi Bankasi AS index of the securities showed.

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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