The lira gained the most in almost two weeks as Turkey’s current-account deficit for December beat analyst estimates.
The currency extended this year’s advance as the current-account gap shrank to about 6 percent of gross domestic product last year from almost 10 percent in 2011.
“More positive news from the Turkish external accounts strengthens our favorable view toward the lira,” Ilan Solot, a currency strategist at Brown Brothers Harriman Ltd in London, said in e-mailed comments.
The lira strengthened 0.4 percent, its biggest appreciation since Feb. 1, to 1.7654 a dollar at 5:03 p.m. in Istanbul, taking its rise this year to 1 percent. Yields on two-year benchmark notes climbed two basis points, or 0.02 percentage point, to 5.82 percent, advancing for a fourth day.
The deficit fell to $4.66 billion in December, from $6.63 billion a year earlier, according to central bank data released today, compared with a $5.4 billion median estimate of 13 analysts in a Bloomberg survey. The full-year gap narrowed to $48.9 billion from a record $77.2 billion a year ago.
“Today’s data is positive for the lira,” Ibrahim Aksoy, an economist at Seker Securities in London, wrote in an e-mailed note. “Given the central bank’s determination to prevent nominal lira strength, potential gains should remain limited.”
Turkey’s central bank reduced its overnight lending and borrowing rates by 25 basis points each to 8.75 percent and 4.75 percent, respectively, last month. A “measured rate cut to the interest-rate corridor or policy rate is possible if the Real Effective Exchange Rate appreciates excessively,” Central bank Governor Erdem Basci said Jan. 29.
The REER Index climbed to 120.16 in January from 118.08 in the previous month. A reading of 120 or above signals excessive currency strength, according to the central bank, which will publish the REER’s February reading on March 5.
Moody’s Investors Service left Turkey’s rating one level below investment grade last month, saying it would consider raising it if the government made further progress in lowering its external vulnerabilities.