Lira Pares Monthly Drop as Fitch Maintains Turkey's Credit Grade

  • Currency recovers after dropping most in about nine months
  • Turkey retained its investment-grade status at Fitch

Turkey’s lira strengthened the most in more than three months as some traders bet its 2.3 percent slide on Friday was overdone, given the decision by Fitch Ratings to maintain the nation’s investment-grade status.

The currency climbed 1.3 percent, the most since Nov. 11 on a closing basis, to 2.9553 per dollar as of 5:56 p.m. in Istanbul. It gained the most among 24 emerging-market currencies tracked by Bloomberg after South Africa’s rand, trimming its depreciation this month to less than 0.1 percent. Meanwhile, the Borsa Istanbul 100 Index advanced 1.2 percent.

The currency sank on Friday by the most in about nine months, when better-than-expected U.S. economic data revived speculation that the Federal Reserve would increase interest rates. Turkey’s reliance on foreign inflows to help fund its currency-account deficit makes its currency vulnerable to investor appetite for riskier assets. Fitch late on Friday kept Turkey’s investment-grade rating unchanged, alleviating pressure on the currency, according Toronto Dominion Bank in London.

“The currency is correcting itself after Friday’s drop, which was overdone,” Bora Tamer Yilmaz, an economist at Ziraat Yatirim in Istanbul, said by e-mail. The Fitch decision is now “out of the way,” he said.

Fitch rates Turkey BBB-, the lowest investment grade. That’s in line with the rating from Moody’s Investors Service, which has a negative outlook. Standard & Poor’s assigns Turkey its highest junk rating.

“I wasn’t expecting any change, but numerous investors I talked to feared a negative rating action,” said Cristian Maggio, Toronto Dominion Bank’s London-based head of emerging-market research.

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