Turkish Lira Advances as Higher Bank Rates Attract Investors

The Turkish lira climbed to a one-week high as banks offered the highest rate on savings after a doubling of central bank rates last month. Stocks rallied.

The lira advanced 1.4 percent to 2.2064 against the dollar at 6:06 p.m. in Istanbul, the most among 24 emerging-market currencies tracked by Bloomberg and the strongest since Jan. 15. The Borsa Istanbul 100 Index of stocks surged 3.4 percent, the most in the world, while yields on two-year benchmark notes rose one basis point to 10.68 percent.

The three-month deposit rate offered by Turkish banks was at 11.10 percent today, equal to the highest since June 2012 and the most among developing nations after Argentina, according to data compiled by Bloomberg. The central bank raised the benchmark one-week repurchase rate to 10 percent from 4.5 percent after an extraordinary interest-rate meeting on Jan. 28.

“The market has started to appreciate the impact of the central bank’s interest-rate increase,” Ugur Kucuk, a fixed-income strategist at Is Investment Securities in Istanbul, wrote in e-mailed comments. “Together with the fading of the panic selloff in emerging markets, the lira debt looks attractive.”

The currency rallied 5.9 percent since Jan. 24, the day before the central bank announced it would hold the emergency rates meeting. The lira weakened to a record 2.3900 per dollar on Jan. 27 and still trades 2.7 percent weaker this year.

“I don’t think the lira can rally sustainably,” Cristian Maggio, an emerging-markets strategist at Toronto Dominion Bank in London, said in e-mailed comments. The higher central-bank rates “will not be enough to support the lira when external conditions sour again, let alone if domestic problems get under the spotlight of foreign investors again,” he said.

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