Turkish lira rises highest against dollar since February due to rate hike

The lira rose more than 0.5 percent to 1.1890 per dollar on Friday to its highest level since the end February.

The currency climbed for the third day, its longest run of increases in a month, after borrowing costs were lifted yesterday by 50 basis points to 16.75 percent, a nine-month high and the most among major developing economies.

The Turkish Central Bank raised the rate by 150 basis points since May as surging oil and food prices forced them to revise inflation targets higher.

STOCKS UP

 

The Istanbul Stock Market also gained 0.65 percent to reach 37.946 points on Friday, lead by a  increase of banking stocks.Â

 

Turkey's Akbank jumped 3.70 percent to 5.60 lira, while Yapi Kredi was up 3.56 percent at 2.33 lira and Isbank gained 1.26 percent at 4.82 lira.

 

Istanbul's stock exchange has been among the poorest performers among emerging markets this year, having lost more than a third of its value.

 

"The recent developments on the ruling (Justice and Development Party) AKP court case are contributing to the positive sentiment," Reuters quoted an Istanbul-based trader. The AKP charged with being "the focal point of anti-secular activities" and if found guilty could be closed down and its leadership banned from party politics for five years.

 

The Constitutional Court rapporteur recommended this week that the party not be closed nor receive any financial penalties. His report, required to move the case forward, is not binding and in recent key rulings the court has not followed the official's recommendations. A verdict is expected in early August.

 

Also the yield on the new benchmark April 14, 2010 bond eased to 20.68 percent on the spot market from Thursday's 20.84 percent.

 

"These high yields attract foreigners. Since the central bank raised interest rates as the foreigners expected we see them selling dollars and buying bonds," Murat Ural, head of fixed income at Akbank told Reuters.

 

Ural said favorable conditions in the global markets plus the expectation that the ruling AKP may not be closed also added to general upbeat sentiment in the market.

 

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