The lira rallied the most in more than a month on bets the central bank will raise lenders’ reserve requirements to bolster its foreign-exchange holdings.
The lira appreciated 0.8 percent to 1.8351 per dollar at 12:32 P.m. in Istanbul, the biggest jump since April 24. Yields on two-year benchmark debt fell eight basis points, or 0.08 percentage point, to 9.45 percent, the lowest in almost a week.
Turkey’s Monetary Policy Committee convenes tomorrow and may increase the proportion of foreign-currency reserves lenders deposit with the central bank. The forex reserve has retreated from $85.9 billion in October -- when Governor Erdem Basci introduced a flexible interest rates policy to defend the currency -- to $80 billion on May 18. Part of the reduction is down to the bank selling dollars last year to boost the lira, which fell 18 percent in 2011.
“We expect a change in requirements tomorrow that will boost the central bank’s reserves by $2.5 billion,” Murat Yardimci, head of trading at ING Bank AS in Istanbul, said in e- mailed comments.
The central bank refrained from lending at its lowest 5.75 percent policy rate throughout last week, keeping the policy tight. The inflation rate rose to 11.1 percent in April, the highest in 3 1/2 years, and the bank’s forecast is for 6.5 percent by the end of this year.
The lira gained 3 percent this year in the biggest appreciation among more than 20 emerging-market currencies tracked by Bloomberg after the Colombian peso.
The Ankara-based bank varies the policy rate daily between 5.75 percent and 11.5 percent within the so-called interest rate corridor to support the currency. It offered to lend 3 billion liras in one-week repurchase agreements at 5.75 percent today.
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