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Lira Heads for Biggest Gain in 1 Month as Bank Cuts Funding

The lira headed for its biggest increase in more than a month as the Turkish central bank reduced its one-week repo funding and record U.S. Thanksgiving sales boosted demand for emerging-market currencies.

The lira advanced 1.5 percent to 1.8575 per dollar at 5:04 p.m. in Istanbul, heading for its biggest gain since Oct. 24. Yields on two-year debt dropped 7 basis points, or 0.07 percentage point, to 10.87 percent, according to a Royal Bank of Scotland index.

The bank provided 12 billion liras today at its 5.75 percent benchmark rate, less than the 14 billion liras banks must repay today from the Nov. 21 sale. It also lent 13.6 billion liras to the largest banks via overnight repo at 12 percent and 200 million liras to smaller banks at 12.5 percent. U.S. retail sales during Thanksgiving climbed 16 percent to a record.

“U.S. data will be strong in December because of Thanksgiving retail sales and this would keep equities strong,” Murat Yardimci, chief trader at ING Bank AS in Istanbul, said in e-mailed comments. “Currencies in the EEMEA are very good today because of risk-on sentiment.”

The lira depreciated 3 percent and the main Istanbul stock exchange index dropped 6.3 percent last week. Turkey’s central bank did not offer dollars today. It last sold $140 million in an auction on Nov. 21. The bank has sold around $9 billion for liras since Aug. 5 to bolster the lira and control inflation.

“Today’s move is a reaction to last week’s heavy sales but nothing has changed and things are still in very bad shape,” Suha Yaygin, deputy chief of emerging-markets trading at Toronto-Dominion Bank in London, said in e-mailed comments. “The central bank is afraid of selling dollars and the lira is without protection.”

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