Lira Strengthens as Stocks Recover on Hostage Release Optimism

The lira strengthened and stocks in Istanbul rose with bonds after Yeni Safak newspaper said Turkish hostages held in Mosul will return home, easing concern the country will get dragged into escalating turmoil in Iraq.

The currency gained 0.5 percent to 2.1067 per dollar at 6:34 p.m. in Istanbul. Yields on two-year government notes fell 20 basis points to 8.25 percent, the first decline in four days. The Borsa Istanbul 100 Index added 1 percent after earlier retreating as much as 1.5 percent.

Militants from the Islamic State in Iraq and the Levant, or ISIL, which broke ranks with al-Qaeda during fighting in Syria, took Turkish diplomats captive in Mosul yesterday after the city was captured two days ago, sparking a 3.3 percent slump in equities and the steepest depreciation for the lira since January. The hostages are expected to be back in Turkey tonight, Yeni Safak newspaper reported, without saying how it got the information.

“There is no official announcement but the market is trying to trade positively” due to the expectation that the detainees in Mosul will be released, Murat Yardimci, head of trading at ING Bank AS, said in e-mailed comments.

The lira also climbed after data today showed Turkey’s current-account deficit narrowed more than 40 percent in April from a year earlier as exports increased.

The Turkish currency fell 15 percent during the 12 months through April, the worst performance among emerging-market currencies in Europe, the Middle East and Africa, according to data compiled by Bloomberg. The current-account shortfall narrowed to $4.79 billion, beating the median estimate of $4.9 billion in a Bloomberg survey of 12 economists.

Turkish companies exported $12 billion of goods to Iraq last year, making it the biggest external market for the nation’s products after Germany, data from the statistics office in Ankara show.

(An earlier version of this story was corrected to show current-account deficit narrowed more than 40 percent)

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