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Lira Surges to One-Week High as U.S. Sees ‘Small’ Syria Strike

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Sept. 9 (Bloomberg) -- The lira strengthened to its highest level in a week as the U.S. Secretary of State John Kerry said an “unbelievably small, limited” military strike will be enough against Syria, Turkey’s neighbor.

The currency appreciated as much as 0.9 percent against the dollar and traded up 0.4 percent to 2.0426 per dollar by 3:13 p.m. in Istanbul. Yields on two-year benchmark notes dropped 16 basis points, or 0.16 percentage point, to 9.30 percent, the lowest level since Aug. 16 on a closing basis.

As the Congress prepared to debate a U.S. intervention, Kerry sought to reassure the public the Obama administration won’t let a Syrian campaign evolve into a years-long commitment with ground troops, like the wars in Afghanistan and Iraq. Turkey’s central bank said it would sell a minimum $200 million of liras today and refrain from holding a one-week repo auction at its 4.5 percent benchmark interest rate as part of its so-called additional tightening measures.

“As it is seen, the USA is constantly showing an indecisive stance and the risk of a military intervention is lessening every day,” Burak Cetinceker, a portfolio manager at Strateji Menkul Degerler A.S. in Istanbul, wrote in e-mailed comments.

The relative strength index of the lira fell to 26 on Sept. 5, below the 30 threshold level that to some technical analysts signals the currency’s losses have been excessive and is due for a rebound. The lira had been “oversold” against the dollar because of “excessive risk-pricing” and now the market is “normalizing,” Cetinceker said.

Lira Weakness

“We’re not talking about war, we’re not going to war,” Secretary of State Kerry said in a press conference in London today after a three-day mission to Europe.

The lira has weakened 8 percent versus the dollar in the last three months in the biggest depreciation among the 24 emerging-market peers monitored by Bloomberg, after the Indonesian rupiah and the Indian rupee.

Turkish Prime Minister Recep Tayyip Erdogan has repeatedly said his country is willing to join any coalition that agrees on taking military action against Assad’s government. Turkey’s army is the second-largest in NATO, after the U.S.

Turkey, which has supported Syrian rebels against President Bashar al-Assad, shares a border with Syria that stretches more than 900 kilometers (560 miles).

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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