ISTANBUL: Turkey's lira firmed on Wednesday, supported by broadly tighter central bank policy while draft credit card regulations aimed at cooling demand for imported goods put pressure on electronics retailers.
Proposed changes in credit card regulations released after market close on Tuesday are expected to hit discretionary spending. Shares in electronics retailer Teknosa dipped 4.4 percent in response.
The changes had little impact on banking shares as moves to curtail credit card spending had been previously signalled by the banking regulator. But they also play in to a generally tighter outlook for official policy in Turkey, which had been expected to work hard at supporting growth in the run up to a cycle of elections beginning next year.
Finance Minister Mehmet Simsek said Turkey would have to accept more modest growth rates until its current account deficit is lowered permanently and the central bank and banking supervisors all seem to be working to that end.
"The overall impact of regulations on the banking sector is not so obvious but profit from cards and consumer instalment loans will decrease," said Erkan Dernek, market strategist at Odeabank.
"I believe it is all in all positive for financial stability, particularly current account balance management."
The country's gaping current account deficit is financed by cheap foreign inflows and has left it particularly vulnerable to any cut in the U.S. Federal Reserve's $85 billion monthly asset purchases. Speculation about the cut have made the lira volatile and also helped prod the central bank onto a more cautious policy tack.
The bank said last week that while it would keep the official interest rates stable, it will further tighten the actual cost of funding to counter above target inflation, responding to market pressure to do more to support the volatile lira.
Istanbul's main stock index rose 0.12 percent to 75,652 points, underperforming the emerging market index , which rose 0.3 percent.
The lira firmed to 2.0140 by 0919 GMT on Wednesday from 2.0160 late on Tuesday. The yield on Turkey's 10-year benchmark bond fell to 9.36 percent from 9.37 percent at Tuesday's close.
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