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08-06-2011, 03:43 PM #1
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Turkish Central Bank Sells Dollars After Interest Rate Cut
Turkish Central Bank Sells Dollars as Interest-Rate Cut Drives Lira Lower
By Steve Bryant and Selcuk Gokoluk
- Aug 5, 2011 5:50 AM PT
Turkey’s central bank began dollar sales today with $93 billion available to defend a currency whose slide accelerated after a surprise rate cut.
The bank sold $50 million in an auction, receiving $91 million of bids, and said future sales may be larger to help protect the lira. The currency plunged to a two-year low after the central bank reduced its benchmark yesterday, citing the risk of a recession imported from Europe. The lira pared losses, adding 0.3 percent to 1.735 per dollar at 3 p.m. in Istanbul.
Governor Erdem Basci is seeking to shore up the lira as counterparts in Japan and Switzerland do the opposite, trying to stem currency gains as global market losses drive investors toward the safest assets. Basci’s critics say it’s his policies that left the lira vulnerable. By keeping borrowing costs at record lows this year even as Turkey’s economy surged on the back of a credit boom, he is squeezing the interest-rate premium that attracts foreign cash to emerging markets.
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