Lira stable as auctions drain off liquidity
ISTANBUL (Reuters) – The Turkish markets ended stronger yesterday as tax payments and central bank auctions swallowed excess lira liquidity in the market. The lira closed 0.6 percent stronger against the dollar at 1.6035 on the interbank market. The yield on the April 9, 2008 benchmark fell to 21.38 percent from 22.29 percent the previous day. The main Istanbul share index rose 2.48 percent to 34,031.08 points thanks to the stronger lira. Traders said the central bank auctions to support the weakened lira and firms’ purchases of lira to pay taxes lifted the lira, which has plunged some 18 percent since late April amid concerns about high inflation, political jitters and a sell-off in emerging markets. Bankers said around 3 billion lira left the market on Wednesday and yesterday to be used for tax payments due this week. The central bank said it withdrew 500 million lira from the market in two lira purchase auctions under a policy introduced this week. It had set a maximum of 500 million lira, after pulling 1 billion lira from the market on Wednesday. «Markets seen to have stabilized for the time being, helped by the central bank’s much more decisive action over the past couple of days,» said Timothy Ash of Bear Stearns. «The central bank finally seems to have realized that ‘we have a problem Houston’ and is now acting like a central bank,» he said. The lira temporarily slipped to 1.6185 to the dollar in early trade after European Union enlargement chief Olli Rehn was quoted as saying the EU may suspend membership negotiations with Ankara over its refusal to open its ports and airports to traffic from member state Cyprus. The EU says Turkey must open its ports and airports to Cypriot traffic under an agreement signed last year extending its customs union to the 10 new EU member states. Turkey says it will not move unless the EU eases the isolation of breakaway Turkish Cypriots. The central bank raised the key lending rate by another 200 basis points to 22.25 percent on Wednesday, the third interest rate hike this month. It kept the borrowing rate unchanged at 17.25 percent.