Turkish Lira Falls to 2-Week Low as Fed-Inspired Optimism Wanes
The lira declined to its lowest level this month as minutes from the Federal Reserve spurred speculation a third round of bond purchases may be less probable.
The Turkish currency depreciated as much as 0.8 percent before paring its loss to 0.1 percent at 1.7697 per dollar as of 5:24 p.m. in Istanbul, its weakest level since Jan. 31, according to data compiled by Bloomberg. Yields (BENCH) on the benchmark two-year debt rose 1 basis point, or 0.1 percentage point, to 9.36 percent, trimming this year’s gain to 212 basis points.
Yesterday’s Fed minutes show the U.S. central bank is “not that near” to another round of quantitative easing, Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS, said from Istanbul in an e-mailed response to Bloomberg’s questions.
“A few” members of the Federal Open Market Committee said economic conditions could warrant buying assets “before long,” and others indicated that action would become necessary if the “economy lost momentum” or price gains seemed likely to remain lower than the Fed’s 2 percent goal, according to minutes of their Jan. 24-25 meeting released yesterday in Washington.
The lira rallied 6.8 percent this year in the second- biggest gain among emerging markets in Europe, the Middle East and Africa as risk appetite for emerging-market assets was re- invigorated after Federal Reserve Chairman said on Jan. 25 that U.S. interest rates will remain exceptionally low for longer and hinted there may be a third round of quantitative easing.
The Turkish central bank reduced lending at its lowest 5.75 percent benchmark interest rate to 18 billion liras during Feb. 13 to Feb. 16, down from 28 billion liras ($16 billion) last week.
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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