The Turkish lira firmed to a fresh four-month high amidst tight liquidity and bonds gained on Friday after output data calmed overheating fears, but publisher Dogan Yayin weighed on the equity index which fell 2 percent. The lira closed at 1.5020, its lowest level since December 14, the week in which the Turkish central bank began a policy of lower rates and higher required reserve ratios which in early March pushed the lira to as weak as 1.62 to the dollar.
While the bank intended to weaken the lira with lower yields, its required reserve ratio (RRR) hikes have actually now seen the currency strengthen amid tight lira liquidity. Banks must fulfil a sharp new hike to RRR, which takes effect on April 15. The central bank injected 7.19 billion lira in a repo facility for primary dealers late on Friday, borrowing at 8.0 percent.
The yield on the November 7, 2012 benchmark bond fell to 8.63 percent from 8.68 percent on Thursday. Lending further support was industrial output data. Production in February rose 13.9 percent on the year, compared to a forecast 16 percent, for an adjusted monthly fall of 1.7 percent. In the two previous months it had gained on the month.
The yield on the 2012 bond has fallen from 9.01 percent at the start of the week, reflecting record low consumer inflation in March and reduced expectations of rate rises. Shares closed down 6.86 percent at 1.90 lira. The Istanbul share index closed 2 percent weaker at 68,093 points, underperforming the benchmark MSCI index, which rose 0.28 percent.
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