ISTANBUL: Turkey's lira hit its strongest to the dollar in three weeks and its bonds rose on Wednesday, buoyed by the aversion of a new year US budget crunch ahead of domestic inflation data on Thursday.
The US Congress approved a rare tax increase on Tuesday that will hit the nation's wealthiest households in a bipartisan budget deal that fends off measures that would have hurt growth in the world's largest economy.
By 0847 GMT, the lira firmed to 1.7781 to the dollar , after hitting 1.7770 earlier, its strongest since Dec. 13, compared with 1.7840 late on Monday. Against the euro-dollar basket the lira firmed slightly to 2.0699 from 2.0710.
"Turkish markets are pricing in the positive news from the US.. We expect the lira to start the new year with a positive outlook," wrote Fatih Keresteci, strategist at HSBC.
The lira firmed more than 5 percent against the greenback in 2012, taking back some of its 20 percent loss in 2011.
The yield on the two-year benchmark bond fell to 6.09 percent, from Monday's close at 6.15 percent. It fell more than 500 basis points in 2012.
"Today's fall in yields is due to the fiscal cliff news from the United States. Tomorrow's inflation data hasn't been priced in yet. If the figures remain below expectations, I think the yield could hit 6 percent in higher volume," said Burak Maldar, a vice president in Halk Invest.
Turkish Statistics Institute will release December inflation figures on Jan. 3 at 0800 GMT. Analysts in a Reuters poll forecast a rise of 0.38 percent in prices on the month and the annual inflation to reach 6.15 percent in 2012.
Istanbul's main share index was up 0.97 percent at 78,968 points, underperforming a 1.65 percent rise in the global emerging markets index.
Turkish equities gained more than 50 percent in value in 2012, compared with around 15 percent for the benchmark global index. The market hit an all-time high of 79,077.32 points on Friday.
Center>Copyright Reuters, 2013
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