Turkish markets weaken

The Turkish lira weakened against the dollar, following the depreciation of the euro after news about Executive Board Member Juergen Stark's retirement from the ECB while bond yields rose as higher-than-expected industrial output stoked investor worries over the widening current account deficit.
The top German official at the European Central Bank is to quit early in disagreement with the bank's policy of buying eurozone government bonds to combat the currency bloc's debt crisis. The lira, which closed at 1.7750 versus the dollar on the interbank market from a previous close of 1.7659 on Thursday, declined to 1.7932 after the news.
"The euro's weakening started yesterday after the ECB meeting. The latest news about the retirement of Stark enlarged the move. However, the lira didn't significantly weaken versus the (euro/dollar) basket," said a forex trader of a bank in Istanbul. The lira traded at 2.1190 versus a euro/dollar basket compared to a peak of 2.1307 on Thursday.
"Next week the EUR/USD moves would be determinant on the lira's fluctuation versus the dollar. If the EUR/USD touches the technical 1.35 level, the lira could weaken to the 1.82 level versus the dollar. Yet, I don't expect the lira to ease versus the (euro/dollar) basket," said a sales manager at the private banking department of a bank in Istanbul.
July's industrial production increased 6.9 percent year-on-year, beating analysts' forecasts of 4 percent growth, data showed on Friday. The benchmark May 15, 2013 bond yield closed higher at 7.92 percent from its level of 7.79 percent before the data was released.
"The higher-than-expected production data increased worries about the current account deficit and resulted in a slight rise in bond yields," said Tufan Comert, a strategist at Garanti Securities. "However, other leading indicators confirm an economic slowdown. And the bond market is still pricing in the fact that the decline in economic activity will be higher than anticipated," he added.
The benchmark yield on Thursday closed at 7.81 percent after ECB President Jean-Claude Trichet highlighted downside risks to economic growth in the eurozone and signalled future rate hikes are off the table. The benchmark Istanbul share index closed down 1.39 percent to 55,902.98, outperforming the emerging markets index which was down 1.84 percent, taking a breather after rising 2.63 percent on Thursday.