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Lira Weakens on U.S. Budget Impasse, Central Bank Dollar Sale

The lira depreciated a sixth day to its weakest level in a month as a U.S. budget impasse curbed appetite for riskier assets and the central bank’s $140 million offer to banks for liras failed to stem the currency’s depreciation.

The lira dropped 1.5 percent to 1.8568 per dollar at 6:10 p.m. in Istanbul, making it the worst performing currency for the past week among more than 20 emerging-market currencies tracked by Bloomberg. It was the lowest level since Oct. 21.

The U.S.’s deficit-cutting congressional super-committee is expected to say today that it failed to reach agreement on at least $1.2 trillion in federal budget savings, a Democratic aide said. The Ankara-based central bank sold $140 million for liras in an auction today, the most since it sold $350 million on Oct. 24. The bank sold $70 million on Nov. 18 and $50 million on Nov. 17.

“The lira’s depreciation against the currency basket has made the central bank more active in intervening in the foreign-exchange market, but it did not change the direction because the mood is bad in the markets,” Fatih Keresteci, a strategist at HSBC Bank AS in Istanbul, said in e-mailed comments. The bank needs to offer “more hefty” figures to stop the lira’s weakening, he said.

Turkey’s currency depreciated 1.5 percent to 2.1808 against an equally weighted euro and dollar basket and traded at its lowest since Oct. 24.

“The positioning on the lira is already unfavorable and it may worsen in the coming period if the central bank does not become more aggressive on the foreign-exchange auctions,” Henza Tukel, a currency trader at Turk Ekonomi Bankasi AS, said in e-mailed comments.

The central bank has sold about $9 billion since it embarked on dollar sale auctions to bolster the lira and control inflation.

“The climate is deteriorating both in fundamental and technical terms,” Burcin Metin, chief currency trader at ING Bank AS in Istanbul, said in e-mailed comments. “The trend has now reversed and even if the dollar falls, it will provide an opportunity to sell the lira and buy the dollar.”

Yields on two-year benchmark debt increased 3 basis points, or 0.03 percentage point, to 10.52 percent, a Turk Ekonomi Bankasi index of the securities showed.

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