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Markets

Turkish lira just off 3-wk high ahead of C/A data

LONDON: The Turkish lira eased off three-week highs versus the dollar on Tuesday while bond prices were steady ahead of

turkish-liraLONDON: The Turkish lira eased off three-week highs versus the dollar on Tuesday while bond prices were steady ahead of two Treasury bond auctions and data that is expected to show the country's troublesome current account gap shrank slightly in August.

By 0630 GMT the lira was quoted at 1.810 per dollar on the interbank market. It closed officially at 1.8290 on Monday, about 1 percent up on the day after pledges by euro zone policymakers to come up with a plan to tackle the region's debt crisis boosted investor appetite for emerging assets.

Against a euro-dollar basket the lira was trading at 2.1605, compared with a previous close of 2.1584 but well off lows seen last week.

Bond prices were steady, with bid yields around Monday closing levels of 8.34 percent. Yields had fallen as low as 8.25 percent -- three-week lows -- on Monday after weaker industrial data reinforced expectations that interest rates would stay low.

Investment bankers in Istanbul said the lira had benefited from optimism that the euro zone might come up with a plan soon to get its debt crisis under control but noted that the currency would be influenced by auction results and the current account data.

Data due at 0700 GMT on Tuesday will show if Turkey's current account deficit is starting to shrink from record highs. Analysts polled by Reuters see the gap shrinking to $3.9 billion, down from $5.32 billion in July. .

That would still be a 29 percent year-on-year jump and equivalent to 9-10 percent of Turkey's gross domestic product.

Worries over financing this deficit have been one of the factors unnerving foreign investors in Turkey and any improvement would boost sentiment on Turkish assets.

"If the data comes around $4 billion and the year-on-year figure increases, that might put a pressure on the lira," said Tufan Comert, senior economist at Garanti Securities. "Any figure below $4 billion will be positive."

Comert predicted the central bank would resume dollar sales after a hiatus on Monday when global trading volumes were depressed by a public holiday in the United States.

"The lira appreciated against the majors in the last few days ... but I guess current lira levels are not sufficient to soothe inflation concerns of the CBRT," he said. "So I expect more intervention in coming days."

The Treasury will auction a fixed coupon issue maturing June 2014 as well as a new benchmark bond for July 2013.

Is Investments said in a client note that the Treasury would probably place 1-1.5 billion lira worth of fixed coupon bonds and 3-3.5 billion lira in the new benchmark.

Turkish stock markets were expected to open higher, tracking the global emerging equity index, which was up more than 1 percent. Shares in Istanbul jumped 1.7 percent on Monday to close at almost a one-week high, buoyed by rising risk appetite globally.

Copyright Reuters, 2011