ISTANBUL: Turkey's lira firmed slightly from a four-month low on Thursday, supported by central bank steps to tighten liquidity and after the announcement of possible measures which might make more foreign exchange available for intervention.
Turkish bonds and shares were steady as global investors held back from buying riskier assets because of concerns over the euro zone.
By 1030 GMT, the lira traded at 1.8475, slightly firmer than 1.8549 late on Wednesday. The currency hit its weakest since mid-January of 1.8563 on Wednesday.
Against its euro-dollar basket the lira traded at 2.0847, firmer than 2.0943 on Wednesday.
"The central bank liquidity tightening has stopped the lira weakening further, but the general trend is still fragile as the lira currently trades in tandem with external developments," said one forex trader.
The central bank tightened liquidity through its intraday repo auction at an average simple rate of 10.87 percent instead of its usual repo auction, which is at a fixed rate of 5.75 percent.
In a step which could the central bank greater room for foreign exchange intervention, the bank said on Wednesday that it may increase the upper limit of lira reserves that banks may hold in foreign exchange at its next policy meeting on May 29.
Because this would raise the central bank's foreign exchange reserves, it could give it room to sell dollars in support of the lira.
"If global risk sentiment improves, the bank may start to intervene but if it worsens, the bank may wait in order not to spend its reserves in vain," said Tufan Comert, strategist at Garanti Securities.
The central bank has been applying an unorthodox mix of policies, including daily liquidity management, high reserve requirement ratios and overnight interest rates to try to rein in inflation and a large current account deficit.
The main stock index was up 0.04 percent at 55,755 points, underperforming a 0.69 percent rise in the MSCI emerging markets index.
"Any market rebound should be limited as risks regarding a disorderly exit of Greece from the euro zone have not yet been priced in. The weak PMI reading from China also adds to the negative mood," wrote analysts at Is Investment.
The yield on the benchmark bond maturing on March 5, 2014, stood flat at 9.52 percent in thin trade.
Comments
Comments are closed for this article.