Lira Drops Fourth Day as Economic Growth Falls to Three-Year Low

The lira weakened for a fourth day as Turkey’s economic growth fell to the lowest in three years and industrial production shrank more than expected, fueling bets for an interest-rate cut this month.

The currency depreciated 0.1 percent against the dollar to 1.79 by 5:40 p.m. in Istanbul, the lowest since Nov. 28, in the longest losing streak since Aug. 30. Yields on two-year benchmark debt fell 1 basis point, or 0.01 percentage point, to 5.75 percent, trading two basis points above their record low.

Gross domestic product, the value of all goods and services produced, advanced 1.6 percent on an annual basis in the third quarter, the state statistics office in Ankara said on its website today. That’s the slowest since a drop of 2.8 percent in the third quarter of 2009. Industrial production contracted 5.7 percent, after expanding 6.2 percent in September. Output was expected to decline 2.5 percent, according to the median forecast of 10 economists in a Bloomberg survey.

Today’s data “will support even more a relaxation of the repo rate and the borrowing rate,” Cristian Maggio, an emerging-market strategist at Toronto-Dominion Bank (TD) in London, said in an e-mail today.

A rate cut will weaken the lira to 1.80 and beyond against the dollar, Maggio said.

The bank lowered the top-end of its so-called interest-rate corridor by 50 basis points to 9 percent on Nov. 20, while keeping the overnight borrowing rate steady at 5 percent and the benchmark interest rates unchanged at 5.75 percent. Turkey’s rate-setting meeting will be held on Dec. 18.

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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