Central bank move sends Turk lira to new 6-year high

ISTANBUL (Reuters) – Turkey’s lira firmed 1.4 percent yesterday to a new six-year high, as investors bet the central bank would not intervene to stem a strong rise in the lira inspired by a market-friendly election result. The lira closed at 1.2340 to the dollar on the interbank market, 1.4 percent stronger on the day. It is trading at its strongest since July 2001, after a currency peg was abandoned during a financial crisis. The central bank said yesterday it would increase the maximum amount of dollars it would buy at its daily auctions, and said dollar supply would grow more than demand. «The central bank’s decision to increase the amount it will buy in auctions has increased the expectation it won’t directly intervene in the market,» one foreign exchange trader said. But Simon Quijano-Evans, economist at UniCredit MIB, said the increase in the auction limits might not be enough, given the market response to the election result and conciliatory words from the Justice and Development Party (AKP) suggesting an upcoming presidential election might not cause as much tension as anticipated. High foreign direct investment and tourism inflows also made intervention more likely, he said. «We would also see the central bank looking to intervene directly on the FX market,» he said in a note. «People are thinking there will be more dollar sales… so I’ll be the first to sell,» another trader said.

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