Lira at all-time low against dollar
Güncelleme Tarihi:
Daily News with wires
Oluşturulma Tarihi: Mart 10, 2009 00:00
ISTANBUL - The Turkish Lira dropped to an all-time low against the U.S. dollar yesterday. Fueled by a historic fall in industrial output, the dollar broke another psychological barrier, surpassing 1.82 liras in early afternoon.
Irked by the rapid rise, the Central Bank intervened in the markets, announcing it would launch dollar auctions, selling as much as $50 million each day, starting today. The size of the auctions may increase, Central Bank said in a statement. The bank had $67.5 billion of foreign exchange reserves as of Feb. 27. It last sold dollars between Oct. 24 and 30 last year, when it auctioned off $100 million.
The dollar was trading at 1.8058 liras at 6 p.m. Yesterday’s rise was an all-time high for the dollar, which had reached 1.77 liras in 2003, 1.71 liras in 2006 and 1.73 liras in November last year.
"We are in uncharted territory," Bloomberg quoted Levent Güven, head of currency trading in Istanbul at Türk Ekonomi Bankası. "1.80 was a psychological level and volatility will be very high from now on."
"All indicators are at a freefall in the United States as well as in Europe and this causes a serious confidence crisis, which boosts the demand for dollar," economist Mustafa Sönmez told Hürriyet Daily News & Economic Review.
"In addition to the sharp fall in industrial production, there are other factors effective on the rise of currency," Sönmez said. "For example, the Finance Ministry’s attempt to encourage offshore investors to repatriate savings, which, in return, provides financial immunity for these companies for five years, is being misused by some, those who have no international operations and need cash in foreign currency."
Commenting on the Central Bank’s decision to launch dollar auctions, Sönmez said: "The Bank had to do this. Selling as much as $50 million each day may not stop the [rise of the dollar]. Sooner or later the Central Bank will have to start selling directly. If the Central Bank fails in its intervention, we would probably face even worse days."
Speaking to daily Hürriyet’s Web site on condition of anonymity, a fund manager said all developing nation currencies are volatile, but as the greenback surpassed 1.80 liras, dollar buying accelerated. "Trading volume is pretty low and in such circumstances, small volumes create rapid movements. I think the money parked in repo is out and some positions are being closed," the manager said.
"Foreign debts of Turkish companies and the uncertainty about the International Monetary Fund are weighing heavily on the lira," Bloomberg quoted Ozan Gazitürk, an economist at Şekerbank.
The plunge in the lira also owed much to the lack of a loan accord with the International Monetary Fund. The lira has dropped 31 percent in the past six months as the economy weakened and the Central Bank lowered interest rates by 5.25 percentage points to 11.5 percent to bolster growth.
Turkey and the IMF broke off negotiations on a new program in January and have not said when they will resume. They are divided over issues including "medium-term structural fiscal reform," the IMF said on Jan. 26, without being more specific. Turkey may not conclude talks before the local elections at the end of the month, Prime Minister Recep Tayyip Erdoğan said March 2, adding that the country does not need the funding.
Turkey needs external funding to bridge a financing shortfall estimated at $30 billion for this year by the Central Bank. The gap includes funding needed by companies to repay debt.
Turkey’s lira-denominated bonds slid, pushing the average yield nine basis points higher to 15.43 percent, according to an index of securities tracked by ABN Amro Holding.
The dollar was trading at 1.8058 liras at 6 p.m. Yesterday’s rise was an all-time high for the dollar, which had reached 1.77 liras in 2003, 1.71 liras in 2006 and 1.73 liras in November last year.
"We are in uncharted territory," Bloomberg quoted Levent Güven, head of currency trading in Istanbul at Türk Ekonomi Bankası. "1.80 was a psychological level and volatility will be very high from now on."
"All indicators are at a freefall in the United States as well as in Europe and this causes a serious confidence crisis, which boosts the demand for dollar," economist Mustafa Sönmez told Hürriyet Daily News & Economic Review.
"In addition to the sharp fall in industrial production, there are other factors effective on the rise of currency," Sönmez said. "For example, the Finance Ministry’s attempt to encourage offshore investors to repatriate savings, which, in return, provides financial immunity for these companies for five years, is being misused by some, those who have no international operations and need cash in foreign currency."
Commenting on the Central Bank’s decision to launch dollar auctions, Sönmez said: "The Bank had to do this. Selling as much as $50 million each day may not stop the [rise of the dollar]. Sooner or later the Central Bank will have to start selling directly. If the Central Bank fails in its intervention, we would probably face even worse days."
Speaking to daily Hürriyet’s Web site on condition of anonymity, a fund manager said all developing nation currencies are volatile, but as the greenback surpassed 1.80 liras, dollar buying accelerated. "Trading volume is pretty low and in such circumstances, small volumes create rapid movements. I think the money parked in repo is out and some positions are being closed," the manager said.
"Foreign debts of Turkish companies and the uncertainty about the International Monetary Fund are weighing heavily on the lira," Bloomberg quoted Ozan Gazitürk, an economist at Şekerbank.
The plunge in the lira also owed much to the lack of a loan accord with the International Monetary Fund. The lira has dropped 31 percent in the past six months as the economy weakened and the Central Bank lowered interest rates by 5.25 percentage points to 11.5 percent to bolster growth.
Turkey and the IMF broke off negotiations on a new program in January and have not said when they will resume. They are divided over issues including "medium-term structural fiscal reform," the IMF said on Jan. 26, without being more specific. Turkey may not conclude talks before the local elections at the end of the month, Prime Minister Recep Tayyip Erdoğan said March 2, adding that the country does not need the funding.
Turkey needs external funding to bridge a financing shortfall estimated at $30 billion for this year by the Central Bank. The gap includes funding needed by companies to repay debt.
Turkey’s lira-denominated bonds slid, pushing the average yield nine basis points higher to 15.43 percent, according to an index of securities tracked by ABN Amro Holding.