The Turkish lira firmed slightly as the central bank (CB) continued to provide costlier liquidity on Friday while falls in banking shares held back the main stock index as a flurry of bank stake sales weighed on sentiment.
Turkish bonds were trading flat, mainly tracking the lira’s performance. The lira traded at 1.8435, stronger than 1.8455 late on Thursday. The currency hit its weakest since mid-January of 1.8563 on Wednesday due to a global sell-off of riskier assets. Against a euro-dollar basket the lira traded at 2.0818, firmer than 2.0833 on Thursday.
“Central bank liquidity tightening has started to support the lira clearly as all the short-term funds, which were about $5 billion, have left Turkey. This means we now got through the worse and the lira tends to strengthen even if there are only tiny inflows into the market,” said Tufan Comert, strategist at Garanti Securities.
“Besides, recent comments of the central bank stimulated expectations that the central bank may announce forex selling auctions. This is also supporting the lira,” Comert said.
Turkish Central Bank Governor Erdem Basci said on Wednesday the bank may increase the upper limit of lira reserves that banks may hold in forex at its next policy meeting on May 29. The limit currently stands at 40 per cent.
The central bank has continued to provide expensive funds to the market on Friday by injecting 6 billion lira through an intraday repo auction at a rate of 10.83 per cent, far above its usual repo rate of 5.75 per cent.
The central bank has been applying an unorthodox mix of policies, including daily liquidity management, high reserve requirement ratios and overnight interest rates to try to rein in inflation and a large current account deficit.
The main stock index edged down 0.04 per cent to 54,894 points, in line with the MSCI emerging markets index. Shares in Akbank were down 4.48 per cent at 5.54 lira after Citigroup said it had sold a 10.1 per cent in Akbank at 5.24 lira per share.
Shares of Denizbank, the Turkish unit of Franco-Belgian bank Dexia were 15.21 per cent lower at 15.05 lira after Denizbank said Dexia and Russian lender Sberbank agreed on exclusive talks on Denizbank’s sale.
By / GulfToday