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Lira Weakens as Turkey Jobless Data Spurs Interest-Rate Cut Bets

The Turkish lira sank the most almost in a month as an increase in the unemployment rate prompted bets the central bank will cut interest rates tomorrow to stimulate economic growth.

The lira lost 0.3 percent against the dollar at 1.7832 at 5:17 p.m. in Istanbul, the biggest drop since Nov. 21, paring this year’s gains to 6 percent, the third-biggest appreciation among 10 emerging markets in Europe, the Middle East and Africa. Yields on two-year benchmark debt were unchanged at 5.74 percent.

The unemployment rate in Turkey climbed to 9.1 percent in September, the Ankara-based statistics office said today, exceeding the estimates of three analysts compiled by Bloomberg. Gross domestic product advanced 1.6 percent on an annual basis in the third quarter, the slowest pace since the 2009 recession, the agency said last month.

“The data confirms that the markedly slower economy cannot” revive the job market, Felix Herrmann, a research analyst at DZ Bank AG in Frankfurt, said in e-mailed comments. “Against this background, expectations the central bank might even deliver a 50 basis point cut tomorrow may have risen.”

The central bank may lower the benchmark interest rate by 25 basis points to 5.5 percent, according to the median estimate of eight economists surveyed by Bloomberg. It will keep the top- end of its so-called interest-rate corridor at 9 percent after lowering it by 50 basis points on Nov. 20, the median estimate of seven analysts shows.

“All key macroeconomic indicators are supporting expectations of an interest rate cut,” Istanbul-based Akbank TAS (AKBNK) said in an e-mailed note today.

Turkey’s economic growth may slow to 3 percent this year from 8.50 percent in 2011, according to the median estimate of 24 analysts on Bloomberg. The slowdown has prompted the central bank to drive down the average cost of funding for banks by more than a half this year to 5.59 percent on Dec. 14, helping the benchmark bond yields fall 527 basis points this year in the biggest rally globally.

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net

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