ANKARA: The Turkish currency, the lira, firmed in early trading yesterday, having rallied on Monday after the central bank intervened on the foreign exchange market.
The lira was being traded at 1.9498 to the dollar during trading yesterday. On Monday it had fallen to a record low level of 1.9740 to the dollar.
On the government debt market, Turkey’s 10-year borrowing rate eased slightly but remained high at 8.80 percent compared with 8.93 percent late on Monday.
The central bank sold dollars to shore up the Turkish currency, as it announced urgent and “strong” action on Monday to defend the lira and clamp down on overheated lending by the financial sector.
The central bank had opened seven foreign exchange auctions on Monday, selling a total of $2.25bn, Finansbank said.
At Capital Economics in London, chief emerging markets economist Neil Shearing commented that “the scale of yesterday’s intervention by the Turkish central bank to defend the lira underlines the vulnerabilities that have built in the country’s economy.”
He noted that the lira had fallen by about 10.0 percent against the dollar since the beginning of May, and that inflation in June was 8.3 percent compared with the bank’s year-end target of 5.0 percent.
He said that the markets had responded to the intervention in a “muted” way, perhaps because the central bank’s “firepower is limited.” Official foreign exchange reserves stood at about $120bn but this included $45bn of currency reserves owned by commercial banks. Net reserves, after removing other items, amounted to about $45bn.
AFP
