The move was Gov. Erdem Başçı’s first such direct intervention since he was assigned in April to arrest a slide in the Turkish Lira.
The lira surged 0.6 percent to 1.8553 per dollar at 5 p.m. in Istanbul, reversing losses made earlier as the Central Bank’s sale continued, according to sources.
Prior to the move, the bank offered as much as $1.35 billion for Turkish Liras and sold $750 million through a pre-announced auction.
Some commentators, however, were unsure of the move’s efficacy. “I’m not sure this intervention sends the right signal to the market,” Roderick Ngotho, a strategist at Royal Bank of Scotland Group, said by email. “Before the EU debt issue really kicked off, the lira had already come under pressure due to the current account. Those who are bearish on the lira hold that stance primarily because of the impression that the sizable current account deficit will persist,” Bloomberg quoted him as saying.
Turkey’s Central Bank is seeking to defend the lira with foreign currency reserves that totaled $85.1 billion on Oct. 7.
It has been selling dollars through regular auctions since Aug. 5 as the country’s record current-account deficit of almost 10 percent of economic output and European financial woes dented investor confidence.
In an emailed statement, the bank said it intervened in the market after seeing “unhealthy prices as a result of speculative behavior linked to a loss of market depth.”
The statement also triggered further large amount of sales.
The move showed how decisive the Central Bank is on the current exchange issue, according to Nurhan Toğuş, the chief economist at Istanbul-based Ata Investment.
“Along with Turkey, the currencies of some other countries have also lost against the dollar due to a rising demand in the U.S. currency following the conditions in Europe,” she told the Hürriyet Daily News in a telephone interview yesterday. “[Because] the lira lost a little bit more, the Central Bank intervened.”
“The Central Bank is clearly mindful of the fact that it has pretty limited foreign exchange reserve cover,” Timothy Ash, head of global emerging markets for RBS, said in an emailed report. “Its logic is to get in early, and in size, and show the market that it is willing to tough it out.”
South Africa also has limited foreign currency reserves though its current account deficit and external financing needs are much lower than Turkey’s, Ash said. |
Source : hurriyetdailynews.com
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