Turkish lira weakens, shares up

The Turkish lira fell nearly 2 percent against the euro/dollar basket on Friday with the central bank withholding forex-selling auctions for a second consecutive day, while bond yields were pushed up on concerns of rising inflation. The currency had strengthened against the dollar in early trade as investors remained confident the bank would not allow further lira deprecation despite not holding a forex selling auction on Thursday.
Turkish shares rebounded from losses a day earlier when tax increases had undermined some stocks. The lira closed at 1.8355 against the dollar on the interbank market compared with a previous close of 1.8320. However, the currency weakened further during the afternoon and stood at 1.8395 in after-hours trade. The main factor was the central bank's announcement it was not opening a forex-selling auction on Friday for the second consecutive day.
Against a euro-dollar basket the lira slipped 2 percent on a weekly basis to 2.1959. It hit its strongest level versus the basket at 2.1237 in early October. "There was no major event that could affect the markets. The lira is declining because the central bank didn't sell dollars for two days. Some investors decided to leave after that," said Tufan Comert, strategist at Garanti Securities.
Government bonds also eased, with the yield of the benchmark bond maturing at July 17, 2013 closing nearly 10 basis points higher at 8.43 percent compared to its level earlier in the week. The main Istanbul share index closed 1.29 percent up at 59,300.29 points, outperforming the MSCI emerging markets index which was up 0.4 percent.
Shares closed 1.48 percent lower on Thursday after four days of consecutive increases, as some stocks were hit by Turkey's decision to raise the special consumption tax (OTV) on alcoholic drinks, tobacco, mobile phones and some vehicle categories. On dollar bond markets, Turkey's share of the EMBI Global index narrowed 12 basis points to 305 basis points over US Treasuries. Turkey's benchmark 2036 dollar bond rose nearly a half point in price to 109.8 cents on the dollar.