Lira Falls First Time in 3 Days as Bank Resumes Cheaper Lending

The lira weakened for the first time in three days after the central bank offered funding at its lowest rate for the first time this week.

The Turkish currency depreciated 0.4 percent to 1.7943 per dollar at 10:06 a.m. in Istanbul, heading for the biggest decline in more than a week. The yield on two-year benchmark debt dropped three basis points, or 0.03 percentage point, to 9.39 percent.

The Ankara-based bank offered to lend at the lowest 5.75 percent rate in its daily one-week repo auctions after having withheld funding at this rate for the past five days, which resulted in a 1.1 percent appreciation of the lira. The bank offered 4 billion liras ($2.2 billion) in one-week repurchase agreements in today’s auction.

“It’s the return of the ‘normal day’ ahead of the rate decision but I do not think it should be interpreted as a signal of a change in monetary policy,” Murat Toprak, head of currency strategy for Europe, Middle East and Africa at HSBC Bank Plc, said in London. “The global market sentiment improved slightly and after several ‘exceptional days’ the central bank eases marginally its tight lending conditions.”

Turkey’s central bank varies its funding rate on a daily basis, maintaining borrowing costs within a 5.75 percent to 11.5 percent interest-rate corridor introduced last year. Days when the bank does not lend at the 5.75 percent rate are considered “exceptional days” and the rest are called “normal days.” The most recent round of policy tightening began on April 11 after the lira weakened to a three-week low at 1.8177 per dollar during intraday trade.

The country’s Monetary Policy Committee will meet today and is forecast to leave its benchmark one-week repo rate unchanged at 5.75 percent, according to all 11 economists surveyed by Bloomberg.

Emerging-market stocks rallied the most in almost a week after the International Monetary Fund raised its global growth forecast and speculation grew China will ease monetary policy.

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