Lira Gains as Surprise Turkey Surplus Offers Cushion Before Fed

  • Turkey posts current-account surplus for second month
  • Currency advances most among emerging markets after data

The Turkish lira strengthened the most in emerging markets after the country posted a current-account surplus for a second-straight month, signaling falling oil prices may reduce the nation’s vulnerability to higher U.S. interest rates. Bonds and stocks also advanced.

The currency rose 1 percent to 2.8878 per dollar by 5:01 p.m. in Istanbul, heading for its biggest gain in more than a week. The surplus in the current account, the broadest measure of trade in goods and services, was $95 million in September, beating a median estimate in a Bloomberg survey of economists for an $80 million deficit.

Turkey’s ability to weather foreign capital outflows may be improving at a time when investor sentiment toward emerging markets has soured amid rising predictions the U.S. Federal Reserve will increase interest rates next month. The lira has fallen 19 percent in 2015 as prospects for higher U.S. borrowing costs curtailed demand for riskier assets.

“Given that Turkey strongly relies on capital inflows to finance its current-account deficit, much better-than-expected data is an encouraging signal for the lira,” Piotr Matys, an emerging-market currency strategist at Rabobank in London, said by e-mail. "The battered lira needs every possible positive signal it can get to provide it with a layer of insulation against the prospect of monetary policy tightening in the U.S.”

Energy Prices

The shortfall has been narrowing as the price of oil dropped 42 percent in the past year, reducing costs for a country that imports most of its fuel. Even so, economists expect the nation to post a current-account deficit of 5 percent of gross domestic product this year, the biggest shortfall among the Group of 20 nations. They forecast it will widen to 5.4 percent of output in 2016.

“We expect this improvement to moderate going forward as the favorable base effect from energy should level out,” Batuhan Ozsahin, a strategist at ATA Invest in Istanbul, said by phone. “Turkey is the kind of a country that cannot grow without posting a current-account deficit.”

As the lira advanced the most since Nov. 2 on a closing basis, the Borsa Istanbul 100 Index of stocks climbed 0.7 percent and the yield on two-year government bonds dropped two basis points to 10.25 percent, its first decline in seven days.

Turkiye Garanti Bankasi AS and Akbank TAS, the nation’s largest listed lenders, led advances in stocks, climbing a respective 1.3 percent and 1.1 percent.

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