Lira slides as forecast
ISTANBUL – Turkey’s lira slid against the dollar yesterday after the crisis-hit country’s economy minister, Kemal Dervis, said he expected the currency to fall and «reach a realistic value» shortly. Turkey’s central bank, treasury and business leaders have all warned that an overvalued lira, which hit nine-month highs of around 1,290,000 to the dollar in recent days, could stymie export and growth hopes under Turkey’s $16-billion International Monetary Fund (IMF) pact. The currency fell sharply to best dollar bids of 1,366,000 lira on the interbank market from a previous 1,336,000 close, while it was pegged back even further to 1,371,000 on the central spot market. Speaking in Washington yesterday, Dervis said the lira would fluctuate over the short term as it begins to stabilize. «I expect the lira to reach a realistic value in a few months,» he told a press conference following the signing of a World Bank loan. «The Turkish lira will rise and fall… but what matters is the way we are heading.» Turkey’s currency has lost some 50 percent of its value since a crisis ripped through financial markets in February 2001, forcing Prime Minister Bulent Ecevit’s government to abandon an IMF-backed currency peg. Local banks sold large amounts of lira for dollars yesterday but retail customers had yet to react to the slide, brokers said. «There are big orders to sell lira at 1,360,000-1,365,000 to the dollar. We can establish a floor at this point. If dollar buying increases, the rate could head toward 1,400,000,» one currency dealer said. A daily central bank dollar purchase auction failed to attract any buyers at all at a maximum offer price of 1,345,246 lira to the dollar. The lira hit an all-time low of 1,650,000 to the dollar in October but reached its nine-month high just days ago on the back of lower inflation expectations under Turkey’s IMF pact. While worries concerning the lira’s high value may now begin to dissipate, talk of volatility may emerge among investors previously benefiting from a short period of relative stability in the currency’s value. The lira slippage, which makes stocks better value in dollar terms, helped Turkey’s main index post modest gains but losses in Europe reflected on the bourse, which closed up 0.22 percent at 11,800.49 points. Brokers said the lira’s path and a long-expected overnight interest rate cut by the central bank would determine movements in stocks and bonds during the coming days. «It seems likely a rate cut that may come from the central bank or movements in the dollar will set the trend,» said Bulent Onder of Acar Securities. Brokers say lower inflation estimates may lead the central bank to its fourth cut in overnight rates since February.
