Turkey Lira Gains Past 200-Day Average on Greek Austerity Deal Speculation

The lira today surpassed a key threshold level which some traders interepret as a “buy” signal on speculation Greece may reach an agreement relating to additional austerity measures.

The Turkish currency appreciated as much as 0.5 percent to 1.7503 per dollar, piercing its 200-day moving-day average of 1.7521, a key technical level. Crossing this threshold and remaining above it is an indication the rally is sustainable. The lira traded at 1.7579 as of 1:52 p.m. in Istanbul, weaker than that level.

Greek Prime Minister Lucas Papademos plans to convene the nation’s political leaders to seek consensus on the cuts required for a bailout as unions called a strike to protest and European leaders pressed for answers. While Papademos and the party chiefs have agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors for a 130 billion-euro ($171 billion) rescue.

“If there is an agreement in Greece, we believe that 1.7150 will enter the target range,” Fatih Keresteci, a strategist at HSBC Bank AS in Istanbul, said in an e-mail to investors today.

Option traders are turning less bearish on the lira, reducing the premium to sell the currency to 3.3 percentage points more than the contracts to buy it, down from a year-high of 6.8 percentage points on Sept. 26, according to data compiled by Bloomberg. Lower cost of selling the currency means fewer investors believe the lira will depreciate.

There is a 67 percent chance the lira will strengthen to 1.72 per dollar in the next three months, according to implied probability calculated from currency options.

Lira Recovers

The lira slumped 18 percent in the biggest decline worldwide and yields soared 390 basis points last year on concern that the debt crisis would ignite a recession in Europe, which buys roughly half of Turkish exports, and widen further the country’s current-account deficit.

Turkey’s currency has strengthened 8 percent this year in the third biggest appreciation among emerging markets in Europe, Africa and the Middle East. The lira was bid higher in January after the U.S. Federal Reserve Chairman Ben S. Bernanke said interest rates will remain exceptionally low for longer and hinted at the third round of quantitative easing.

Yields on benchmark two-year Turkish bonds fell 6 basis points, or 0.06 percentage point, to 9.35 percent, according to a Turk Ekonomi Bankasi AS index.

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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