Turkish central bank moves to rein in fast-rising lira

ANKARA (AFP) – The Turkish central bank announced yesterday it had bought dollars on the foreign exchange market to rein in volatility triggered by hopes of a settlement to the decades-old division of Cyprus. «Because the volatility on the foreign exchange market increased in recent days due to positive expectations regarding the Cyprus talks, the central bank intervened in the market by making direct purchases,» the bank said in a statement. It added that intervention did not mean the central bank was concerned over the lira’s levels. «Like our other direct interventions, this intervention does not signal a discomfort over the exchange rate,» the statement read. An analyst said that the central bank was estimated to have bought some $500 million (425 million euros), bringing the greenback from 1,302,000 liras to 1,327,000 liras on the interbank market. But he cast doubt on the bank’s ability to stop the strengthening of the lira in the long run. «As long as the outlook is positive, the lira will continue to rise,» Tolga Koyuncu, a dealer at Oyak Bank, told AFP. The Turkish lira gained strength after leaders of the rival Greek and Turkish Cypriot communities agreed last week to resume negotiations to reunify the Mediterranean island before May 1 when the it will join the ranks of the EU. A settlement of the Cyprus question is seen as key to the EU aspirations of Turkey, which occupied the northern third of the island in 1974 in response to a Greek Cypriot coup aimed at uniting the island with Greece. Turkey is pressing the pan-European bloc for a date to begin accession talks, but has been told by Brussels that it should first help broker a settlement to the island’s division. The value of the Turkish lira was slashed by half against the dollar in the wake of two severe financial crises in 2001 which sent the country into its worst recession in years. Turkey has since been making headway with a $16 billion standby deal with the International Monetary Fund, with the lira recovering against the dollar.