ISTANBUL: The Turkish lira firmed slightly while shares inched down from record highs on Friday, with investors awaiting a ratings agency update and a central bank inflation report next week. Bond yields were steady with the yield on the two-year benchmark bond at 5.84 per cent, unchanged from on Thursday’s close.
The lira was firmer at 1.7664 to the dollar, from 1.7705 late on Thursday. Against its euro-dollar basket it eased to 2.0691, from to 2.0685.
“The lira firmed following the euro’s global strengthening,” said Burcin Metin, head of forex at ING Bank. “There is no reason for the lira to firm as the central bank cut its rates and said it won’t let the currency appreciate,” Metin added.
Turkey’s central bank cut its overnight borrowing rate to 4.75 per cent from 5 per cent and its lending rate to 8.75 per cent from 9 per cent on Tuesday. It held its one-week repo policy rate at 5.50 per cent.
Investors were awaiting Moody’s teleconference on Monday to discuss, among other things, Turkey “shifting closer to an investment grade sovereign rating” and the central bank’s quarterly inflation report due on Jan.29. Turkey is hoping another major ratings agency will lift it to investment grade, after Fitch did so last November.
Turkey’s Central Bank Governor Erdem Basci said on Thursday he did not expect any significant revision to the bank’s end-2013 inflation forecast of 5.3 per cent due to the tobacco tax hikes.
The bank is trying to avoid an excessive appreciation in lira as this would make imports cheaper and exports more expensive, damaging Turkish products competitiveness and widening already high current account deficit.