ISTANBUL: , The Turkish lira traded near record lows while bonds weakened in thin volumes yesterday, as investors monitored the central bank’s response to Thursday’s sharp sell-off triggered by Federal Reserve plans to cut back its asset-buying programme.
The lira, which has lost around 8 percent of its value against the dollar this year, hit a fresh all-time low of 1.9499 overnight and was trading at 1.9415 by 1510 GMT, weaker than the 1.9363 seen late on Thursday.
The central bank, which sold $350m to support the lira in six forex auctions on Thursday, opened another $50m auction yesterday. HSBC Asset Management strategist Ali Cakiroglu said he expected cautious trading after Thursday’s losses, with the direction of the lira setting the tone for markets as a whole.
“In this connection the decision which the Turkish central bank takes will be monitored. I think the high level of volatility will continue,” he said.
Bankers said on Thursday the central bank could call an emergency meeting and raise the upper band of its interest rate corridor in response to the lira weakness. It would be the first time it took such a step since August 2011.
The central bank held its monthly rate setting meeting on Tuesday and kept its main policy rate, the one-week repo rate, at 4.50 percent, its borrowing rate at 3.5 percent and its overnight lending rate at 6.5 percent.
The bank’s next monetary policy meeting is due on July 23, but many bankers argue it cannot afford to wait that long.
“The central bank’s sale of foreign exchange in the current conditions makes the job of exiting (the market) easier for those who want to,” said a forex trader at one bank, adding that direct intervention could also be an option.
Reuters
