ISTANBUL: The Turkish lira extended losses on Tuesday following policy easing signals from the central bank while bond yields inched up after hitting record lows the previous day.
Turkish shares were flat, with some investors selling banking shares ahead of the secondary public offering of a 20.8 percent stake in Turkish lender Halkbank due to take place on Nov. 20.
Turkish central bank Governor Erdem Basci signalled on Monday that the bank could cut interest rates if the lira appreciates further.
By 1030 GMT, the lira had eased to 1.8067 to the dollar from 1.7987 late on Monday. Against the euro-dollar basket, it weakened slightly to 2.0477, from 2.0431.
"The lira continues to weaken after the central bank governor's comments. We expect the lira to ease further in the short term. It would trade between 1.78 and 1.82 (to the dollar)," Tufan Comert, strategist at Garanti Securities, said in a note.
After Basci's comments on Monday, the lira hit 1.8020 to the dollar, its weakest level since late October.
The yield on Turkey's two-year benchmark bond inched up to 6.41 percent on Tuesday, from 6.38 percent at Monday's close.
It hit an all-time low of 6.30 percent on Monday as the central bank governor's comments boosted expectations for policy easing. Since the start of 2012, the yield has fallen by around 450 basis points.
"Short-term bonds have performed better after the central bank comments. But, the sharp fall in the bonds has been slightly reversed as the market is pricing in only a limited rate cut from the central bank and some investors are selling to take profits," said Erkin Isik, strategist at TEB.
Analysts said the fall in long-term bond yields was limited compared with short-term bond yields as long-term bonds depend more on the inflation trend while short-term bonds are affected by the central bank's policy decisions.
Annual inflation in Turkey fell to 7.8 percent in October, from 9.2 percent a month earlier, but remained way above the central bank's year-end target of 5 percent.
At its policy meeting in October, the bank cut the overnight lending rate for the second month in a row, by 50 basis points to 9.5 percent, to support the slowing economy. But it kept its overnight borrowing rate at 5 percent and its policy rate, the one-week repo rate, at 5.75 percent.
Istanbul's main share index was down 0.35 percent at 71,109 points, outperforming a 0.79 percent fall in the global emerging markets index.
Turkish banking shares were down 0.75 percent, after falling 1.7 percent on Monday as investors sold to raise cash to buy into the secondary public offering of Halkbank's 20.8 percent stake on Nov. 20.
"Today further weakness led by banks can be seen ... Daily support and resistance levels (for the benchmark share index) are 70,800 and 71,500 respectively," analysts at Ata Invest said in a note.
Trade in Halkbank shares was suspended on Monday until Nov. 21 due to the sale.
The sale will take place on Nov. 20 at a price range of 13.80 lira to 15.90 lira per share.
Comments
Comments are closed for this article.