The lira weakened for the first time in three days as Moody’s Investors Service ended speculation of an imminent upgrade of Turkey’s credit rating, saying the current-account deficit is a “key area of risk.”
The lira depreciated 0.1 percent against the dollar to 1.7686 by 5:33 p.m. in Istanbul, paring this year’s advance to 1.1 percent, the biggest appreciation in emerging Europe, Africa and the Middle East after the Romanian leu, Bulgarian lev and the Russian ruble.
“A greater resilience to balance-of-payment shocks” is a pre-requisite for Turkey attaining investment grade, Moody’s said in an updated credit opinion sent by e-mail today. Financing of the current-account gap renders Turkey vulnerable and the country’s savings rate trails many of its peers, Sarah Carlson, an analyst at Moody’s, said in a teleconference call.
“We have the conviction that the probability of a rating upgrade from Moody’s in the short term has lessened,” Ali Cakiroglu, a strategist at HSBC Asset Management in Istanbul, said in an e-mailed note.
Fitch Ratings upgraded Turkey in November, the country’s first investment-grade ranking in 18 years. Moody’s will probably raise Turkey within six months and bond yields may fall as much as 35 basis points on the move, Goldman Sachs Group Inc. said in an e-mailed report on Jan. 24. S&P rates Turkey two levels below investment grade.
Investors bought $411 million of bonds in the week ending Jan. 18, bringing this month’s total to $1.9 billion, the best start to a year since 2011, according to the central bank data. Turkey attracted a record $16 billion of foreign inflows in bonds last year.
The ISE National 100 Index of stocks sank 4.2 percent, with the gauge for banks sliding 5.6 percent, the most since September 2011. Yields on benchmark two-year notes dropped three basis points, or 0.03 percentage point, to 5.85 percent.