The lira weakened for the first time in three days and bond yields rose from a record low on bearish currency forecasts for next year.
The lira depreciated 0.2 percent to 1.7882 per dollar at 5:07 p.m. in Istanbul, the most since Nov. 26. Yields on two-year benchmark debt rose seven basis points, or 0.07 percentage point, to 5.80 percent, rebounding from the lowest since at least 2005.
The Turkish currency may weaken 8 percent nominally against the dollar by the end of next year, Ahmet Akarli and Michael Hinds, analysts at Goldman Sachs International, said in an e-mailed statement today. The lira was the world’s most overvalued currency, Washington-based Peterson Institute for International Economics said in a report published on Nov. 30.
“Investment houses have started to announce their 2013 outlook and some institutions are extremely bearish on the lira,” Ali Cakiroglu, a strategist at HSBC Asset Management, said in e-mailed comments from Istanbul. “This is getting into the prices.”
Two-year lira note yields have plunged 521 basis points this year, the biggest drop worldwide among emerging markets. The lira has gained 5.7 percent against the dollar this year in the biggest advance among European emerging markets after Hungary and Poland.
Turkey’s trade gap shrank to $5.5 billion in October from $8 billion a year earlier, the statistics office in Ankara said on Nov. 30. The reduction will help extend a narrowing trend in the nation’s current-account deficit, which contracted for an 11th month in September.
“A measured cut” may be considered in the policy rate of 5.75 percent and overnight borrowing rate of 5 percent “in the forthcoming period,” the central bank said to economists from Turkish banks in a presentation published on its website in Ankara yesterday. Turkey’s inflation rate slid to 6.4 percent in November, the lowest level since September 2011, the statistics agency in Ankara said on Dec. 3. The rate-setting panel will meet on Dec. 18.
The possibility of an interest-rate cut is also putting downward pressure on the currency, Cakiroglu said.