Aug. 15 (Bloomberg) -- Turkey’s lira is about 5 percent or 10 percent undervalued against a basket comprising the dollar and the euro, central bank Governor Erdem Basci said.
The currency gained after Basci made the comments in an interview in Ankara today with CNN Turk television and was trading at 2.1525 to the basket at 1:40 p.m., from about 2.1580 before the interview.
“The central bank’s view means that the fair level of the dollar-lira rate is 1.65 compared to the current 1.77,” Ozgur Altug, chief economist for BGC Partners in Istanbul, wrote in a note to investors.
Basci’s comments were his latest aimed at slowing a decline in the currency, which has lost about 13 percent against the dollar this year and accelerated its falls after he cut the benchmark interest rate on Aug. 4.
The central bank’s policy will be determined by the speed and success of efforts in Europe to resolve the sovereign debt crisis, Basci said today. The lira may appreciate if there’s a rapid solution to the crisis, and the central bank is prepared to provide liquidity when needed, he said.
The bank cut the benchmark one-week repo rate to 5.75 percent from 6.25 percent at an emergency meeting on Aug. 4, saying the measure was designed to limit the impact of the European crisis on Turkish growth. The situation in Europe now looks better than it did on that day, Basci said.
Still, figures showing that seasonally adjusted unemployment rose to 10.3 percent in May from 10.1 percent in April support the bank’s forecasts that gross domestic product may be flat in the second quarter compared with the first, Basci said. There’s likely to be a small GDP increase in the third quarter, he said.
The economy grew 1.4 percent in the first quarter of the year, compared with the previous three months. Second-quarter figures will be announced on Sept. 12.
Inflation will end this year closer to the bank’s 5.5 percent goal than its forecast of 6.9 percent, made last month, he said. The rate was 6.3 percent in July.
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