Turkey’s central bank (CB), anxious to stem losses in the lira, may increase the amount of dollars it offers in daily currency auctions in coming days, Governor Erdem Basci said on Friday as the bank announced its biggest sale yet.
The local currency - hit by mounting concerns over Turkey’s vulnerability to external economic shocks as well as an unexpected interest rate cut - rose on the comment, which came after the bank offered $100 million in an auction due to conclude around 1110 GMT
Turkey launched forex-selling last week to support the lira, which so far have been limited to a range of $50-70 million.“In the coming days the volume of forex-selling auctions could be increased gradually if necessary,” Governor Basci said in a one-line statement released shortly after on Friday’s auction was opened.The announcement boosted the lira to 1.7770 against the dollar from 1.7850 previously. The local currency has lost some 13 per cent against the dollar since the start of the year.
Its declines accelerated at the end of July as concerns grew that Turkey’s huge current account deficit and reliance on imported oil made it increasingly vulnerable to a deteriorating global economic backdrop.“We see the lira is appreciating after the statement. This results from the impression markets that the central bank doesn’t want the lira to depreciate further,” said Tufan Comert, a strategist at Garanti Securities.He said he thought the auction amount was increased because of a decline in liquidity rather than because of the lira’s level.
“If there is no big change in EUR/USD, we expect the lira to fluctuate between 1.7650-1.7900 against the dollar. However it is still early to talk about an appreciation trend of the lira,” Comert said.As well as launching forex-selling auctions last week, the bank cut its policy rate to an all-time low to bolster a still fast-growing economy amid fears about the impact of global economic risks.The bank sought to mitigate the impact of the cut on the lira by raising its overnight borrowing rate in a bid to induce foreigners to park funds in the local currency.
From / Gulf Today