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Lira Gains First Day in Five as Central Bank Cuts Lending

The lira strengthened for the first time in five days as the central bank reduced lending to slow the currency’s depreciation.

The currency appreciated as much as 0.3 percent before paring its rise to less than 0.1 percent at 1.7884 per dollar as of 2:54 p.m. in Istanbul. It weakened 2.4 percent in the past four days. Yields on the two-year benchmark debt declined two basis points, or 0.02 percentage point, to 9.38 percent, according to a Turk Ekonomi Bankasi AS index.

The central bank has reduced the amount it lends at its lowest benchmark rate of 5.75 percent for the third day. The last time it lent 7 billion liras, the upper end of its lending range, was on March 2. It lent 6 billion liras and 5 billion liras on March 6 and March 5, respectively, and 3 billion liras today.

“We can conclude the central bank is displeased with the recent depreciation of the lira,” Ali Cakiroglu, a strategist at HSBC Private Bank in Istanbul, said in a note.

Turkey’s inflation rate fell to 10.4 percent in February from a three-year peak of 10.6 percent a month earlier, the statistics agency in Ankara said. The central bank’s target for 2012 inflation is 5 percent.

The country’s current-account deficit narrowed in the last two months of 2012 after a credit-fueled boom led to a surge in imports that pushed the 12-month trade gap to a record $78.6 billion in October. The deficit is still about 10 percent of gross domestic product.

The lira slumped 18 percent last year in the biggest decline worldwide, as Turkish inflation increased to more than double the central bank’s target and the current-account gap widened.

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