Lira Touches 11-Day Low on Rate-Cut Speculation, Mine Disaster

The lira touched the lowest level in 11 days as some traders speculated the central bank may cut rates next week as the nation mourned the dead from its worst mining disaster.

The Turkish currency fell 0.1 percent to 2.1003 per dollar at 12:28 p.m. in Istanbul, extending its weekly decline to 1.1 percent, the most since February. It earlier touched 2.1066, the weakest level since May 5. Yields on two-year notes climbed nine basis points to 9.21 percent as the central bank cut money-market funding.

The central bank will meet on May 22 on interest rates. One out of the four analysts surveyed by Bloomberg expects a 50 basis-point reduction in the one-week benchmark interest rate of 10 percent, while the others expect rates to be left unchanged. Turkish police used tear gas to disperse thousands of protesters after at least 284 people died in a mining accident.

“The market is waiting for the central bank’s meeting next week and investors seem to prefer being prudent ahead of a possible rate cut,” Murat Toprak, head of Europe, Middle East and Africa currency strategy at HSBC Holdings Plc in London, wrote in e-mailed comments yesterday.

The lira has rallied the second-most in emerging markets since Prime Minister Recep Tayyip Erdogan’s party won municipal elections on March 30 after accusations of graft against the government sent the currency tumbling to a record in January.

“After a substantial lira rally, it is not surprising to see some profit taking,” Toprak said.

Police clashed with protesters in Kadikoy on Istanbul’s Asian shore late yesterday. In Izmir, the biggest major city near the western town of Soma where the mine is located, at least 77 people were detained during protests throughout the day, according to the official Anadolu news agency.

The Central Bank of Turkey curbed the amount of funding by 5 percent at its daily repurchase auctions to 19 billion liras ($9 billion) from 20 billion liras a week earlier.

Before it's here, it's on the Bloomberg Terminal.