Turkish bonds and the lira weakened after higher-than-expected trade deficit figures on Friday while shares fell as worries about the global economy weighed. Comments from Central Bank Governor Erdem Basci that the lira, down 17 percent against the dollar so far this year, has fallen enough initially steadied the currency, but it weakened again in late trade.
Turkey's trade deficit rose 19.1 percent year-on-year in August to $8.23 billion, data showed on Friday, higher than a forecast deficit of $7.3 billion. Turkey's external deficits are regarded as the greatest flaw in an otherwise strong economy, but the government expects the deficits to subside as the economy begins to slow due to global problems.
After the data, the lira weakened against the dollar on the interbank market to 1.8590 compared with a previous close of 1.8545. The currency closed at 1.8585 against the dollar on Friday. "Investors continue to get out from emerging currencies. There is also an additional demand for the dollar as it is the end of the month. I expect the lira to stand flat during the day. Next week we can see a better trend in the lira," said Tufan Comert, a strategist at Garanti Securities.
The yield on Turkey's benchmark May 15, 2013 bond closed at 8.41 percent on Friday after a previous close of 8.34 percent. "The higher-then-expected trade deficit data as well as Fitch's statement affected negatively the bond market which caused an increase of bond yields," said a fund manager at a portfolio company in Istanbul.
Fitch Ratings analyst Ed Parker said in a interview on the CNBC-e television that Turkey needs sustainable growth in order to be upgraded to investment grade. Istanbul's main share index closed down 0.11 percent to 59,693.43 points on global economic worries, outperforming the emerging markets index, which was down 1.77 percent.