Lira Set for Week-High as Turkey Sells Dollars for Fifth Day

The lira headed for its highest level in a week as the Turkish central bank sold $350 million to curb currency volatility.

The exchange rate appreciated 0.1 percent to 1.9325 per dollar at 4:27 p.m. in Istanbul, its highest level on a closing basis since June 19. Yields on two-year benchmark debt rose two basis points, or 0.02 percentage point, to 8.14 percent, extending their advance this month to 207 basis points.

The central bank lent 4.5 billion liras ($2.3 billion) in its one-week repo auction at the policy rate of 4.5 percent. Today’s foreign-exchange sale compares with $150 million sold at each auction in the last two days. It has sold $1.3 billion since June 11 as the lira hit a record low of 1.9602 per dollar on June 24. The MSCI Emerging Markets Index rose for a second day, jumping the most on a closing basis since January 2.

“Calming of global markets and selling of dollars by the central bank” spurred the lira’s gains, Tufan Comert, a strategist at Garanti Securities in Istanbul, said in e-mailed comments. Lending at the policy rate to commercial banks in one-week repo also supported the currency, he said.

Swings expected in the lira by derivative traders hit a one-year high on June 24, with three-month implied volatility of the currency climbing to 13.35. It has since fallen to 13.04.

The lira depreciated 3 percent this month, the most after the Russian ruble, among emerging markets in Europe, the Middle East and Africa as Prime Minister Recep Tayyip Erdogan’s government faced the biggest protests in a decade.

“Most emerging market investors remain very reluctant, especially of countries with large current-account deficits, such as Turkey and India,” Ilan Solot, a currency strategist at Brown Brothers Harriman & Co. in London, wrote in e-mailed comments today.

Turkey’s current-account deficit swelled to $8.2 billion in April, the biggest monthly shortfall since March 2011. The Indian rupee slumped 1.8 percent to 60.7300 against the dollar, its lowest level since at least 1973.

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