Lira Weakens First Day in Three as Central Bank Boosts Funding

The lira weakened for the first time in three days after the central bank raised the amount of funding for lenders to the highest level in two weeks.

The Turkish currency depreciated 0.2 percent to 1.8161 per dollar at 10:33 a.m. in Istanbul. Yields on two-year benchmark bonds increased one basis point, or 0.01 percentage point, to 7.78 percent, climbing for the first time in three days.

Turkey’s central bank offered 4 billion liras ($2.2 billion) in one-week repurchase agreements at its lowest funding rate of 5.75 percent today, the most since July 13. Governor Erdem Basci, who varies rates daily within a 5.75 percent to 11.5 percent corridor to control credit growth, said yesterday he will switch the monetary policy’s focus to bank reserve requirements. Basci cut the forecast for 2012 consumer-price growth to 6.2 percent from 6.5 percent.

“I estimate the average funding cost declined to 7.7 percent today from 8.2 percent yesterday,” Erkin Isik, a fixed- income strategist at Turk Ekonomi Bankasi AS (TEBNK) in Istanbul, said in e-mailed comments.

The central bank cut the average funding cost to as low as 7.65 percent on July 20 from 10.83 percent on May 25, lowering borrowing costs for lenders, according to data compiled by Bloomberg.

To contact the reporters 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