Turkish lira hit by dollar strength, eyes on inflation data

ISTANBUL: The Turkish lira weakened on Monday in line with emerging market currency weakness against the dollar and with investor attention focused on Tuesday's June inflation data which was expected to show no let-up in annual double-digit price rises.

The lira, which has weakened some 18 percent this year, stood at 4.6202 at 0930 GMT, down 0.7 percent from Friday's close. The central bank has raised key interest rates by 500 basis points since late April to underpin the currency.

Monday's losses were fuelled by emerging market concerns over prospects for a full-blown trade war, which hit risk appetite.

"If it wasn't for global risk aversion fueled by trade tensions, I think the lira would have been trading a little higher against the dollar and against the euro," said Piotr Matys, emerging market strategist at Rabobank.

On Tuesday, the statistical institute will release June inflation data. In a Reuters poll, analysts forecast the consumer price index (CPI) would climb 1.4 percent month-on-month, down from a rise of 1.62 percent in May.

"Obviously a rise in inflation will be driven by the lira weakening quite substantially over the past few months. Whether that is going to weigh on the lira, I'm not convinced," Matys said, adding negative news had already been priced in.

At year-end, annual inflation was seen at 12.5 percent, up from a forecast of 11.5 percent in the previous survey.

The Istanbul Chamber of Commerce said on Sunday retail prices in the city rose 1.27 percent in June.

Manufacturing PMI data on Monday showed that the sector had contracted for the third consecutive month in June, with the PMI number edging up 0.4 points to 46.8.

The yield on the benchmark 10-year bond rose to 16.87 percent from 16.35 percent on Friday.

The main stock index rose 0.35 percent to 96,857.