Lira Gains First Day in 5 on Tighter Policy, Fed’s Stimulus Hint

The lira rallied for the first time in five days on tighter liquidity and as the U.S. Federal Reserve’s signal that further easing remains an option bolstered investors’ appetite for emerging-market assets.

The lira appreciated 0.4 percent to 1.8192 per dollar at 10:33 a.m. in Istanbul. The yield on benchmark two-year debt rose for the fourth time in five days, up four basis points, or 0.04 percentage point, to 9.57 percent.

The Turkish central bank offered to lend 2 billion liras ($1.01 billion) for a third day in its one-week repurchase agreement auctions, compared with the 1 billion-lira minimum and 6 billion-lira maximum it can lend. Several members of the Federal Open Market Committee said new actions could be necessary if “downside risks to the forecast became great enough,” according to the minutes of the committee’s April meeting released yesterday in Washington.

“We can call this policy as semi-exceptional days,” Ercan Erguzel, an economist at Denizbank AS (DENIZ), said in e-mailed comments. “Things still look turbulent.”

The central bank varies its funding rate daily, keeping borrowing costs within a 5.75 percent to 11.5 percent interest- rate corridor introduced last year. The days it refrains from lending at 5.75 percent are termed “exceptional days.”

HSBC Bank Plc exited its short dollar, long lira trade as Greece’s political and debt crisis deepened, the lender said. It opened a short dollar, long lira position at 1.81 with a target of 1.74 on March 22, Murat Toprak, London-based head of the bank’s currency strategy for Europe, Middle East and Africa, said in an e-mailed note dated May 16. The lender closed the position at 1.83 for a nominal loss of 1.1 percent.

The lira will probably to weaken to 1.91 per dollar by the end of the year, currency forwards 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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