May 21 (Bloomberg) -- The lira strengthened for the first time in seven days, snapping its longest losing streak in six months after the central bank tightened monetary policy.
The Turkish currency gained as much as 0.7 percent in intraday trade before trading less than 0.1 percent stronger at 1.8343 per dollar at 4:44 p.m. in Istanbul. The currency advanced 3.1 percent this year in the third-best performance among emerging markets after the Colombian peso and the Hungarian forint. The six-day slump in the lira, ending May 18, was the longest string of declines since Nov. 21.
Turkey’s central bank has withheld lending at its lowest annual funding rate for the first time since May 11 and instead provided today 2 billion liras in one-week repurchase agreements at 10.8 percent and 500 million liras overnight lending at 11 percent. The bank varies the policy rate daily, keeping borrowing costs within a 5.75 percent to 11.5 percent interest-rate corridor introduced last year.
“The lira’s depreciation was going to a dangerous point for the central bank,” Tufan Comert, a strategist at Garanti Securities in Istanbul, said in e-mailed comments, adding this prompted the central bank to tighten.
The lira depreciated 1.3 percent over the past five days, piercing its 200-day moving-day average at 1.8073 that placed the currency in oversold territory on May 18, according to the relative strength index.
“The lira lost at that moment when the euro lost against the dollar,” Felix Herrmann, an analyst at DZ Bank AG in Frankfurt, said in e-mailed comments.
“The positive effect of this morning auction at 11% has already vanished as it seems. Important for further Lira gains is that the central bank sticks to lending at a higher rate,” Herrmann said.
The yield on benchmark two-year debt was unchanged at 9.51 percent.
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