The lira gained the most in two weeks after Fitch Ratings said it was “quite close” to reviewing the country’s top junk status.
The currency appreciated 0.5 percent to 1.8149 per dollar by 5:02 p.m. in Istanbul, the biggest advance since Sept. 25 on a closing basis. Bond yields rose one basis point, or 0.01 percentage point, to 7.64 percent.
Turkey’s rating is “quite close” to being reviewed, Paul Rawkins, senior director at Fitch Ratings, said at a conference in London today. The country’s budget deficit will come in at 2.3 percent of gross domestic this year and decline to 2.2 percent in 2013, Deputy Prime Minister Ali Babacan said while announcing the country’s economic plan in Ankara yesterday. This compares with a shortfall of 5.3 percent in the euro region, 5.1 percent in Poland and 3.1 percent in the Czech Republic.
“Markets got excited” after the Fitch comments, Baris Buyukdemir, general manager of Ceros Securities in Istanbul, said in e-mailed comments. “There will be a decision in the short term.”
The lira weakened the most in two months last week after Turkey retaliated against shelling by Syria that claimed five lives. Turkey’s top general Necdet Ozel warned of a tougher response if Syrian shells continue to land in Turkey.
Turkey is a stable story with “strong” public finances, and the Syrian conflict is “not having huge impact” on its budget, Rawkins said. Fitch rates the country BB+, one level below investment grade with a stable outlook.
Moody’s, which rates the nation one level below investment grade, said on Oct. 8 it will assess Turkey’s upgrade if fragility is reduced. Standard and Poor’s rates the country BB, two levels below investment grade.