Turkish lira weakens to 8-month low of 2.29 against U.S. dollar

The release of the survey had little impact on Turkey's financial markets

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Turkey's lira hit its weakest level in eight months on Wednesday, with daily tightening by the central bank doing little to protect the currency from global risk aversion and concern over the domestic economy.

The lira slipped to 2.2910 against the dollar at 0805 GMT, its weakest since Jan. 31, from 2.2809 late on Tuesday.

The central bank tightened liquidity last week through reducing the amount available at daily repo auctions at a rate of 8.25 percent, pushing the average cost of borrowing up to 8.72 percent from 8.3 percent a week ago.

Since Friday it also increased the amount of foreign currency available at daily auctions to a minimum of $40 million from $10 million. At its monetary policy meeting last week it left rates on hold.

"The lira is under a fresh weakening spell; we sense more pressure in coming weeks as global markets remain volatile and shy away from risk," a note from Commerzbank said, adding, "Turkey's own inflation and current-account fundamentals are not helping either."

Worries about when the U.S. Federal Reserve will hike interest rates, making emerging market assets comparatively less attractive, have helped encourage a risk-off sentiment in global markets in recent days.

Turkey would be especially vulnerable to such a step because it is dependent on foreign capital inflows to finance its large current account deficit.

Turkey is struggling to fight inflation which reached 9.54 percent in August, well over the central bank's 5 percent target, at the same time as growth falters.

According to data out last month, gross domestic product (GDP) grew 2.1 percent year-on-year in the second quarter, missing forecasts and raising questions about the 2014 target.

Markit PMI data showed Turkish manufacturing activity expanded slightly in September with demand from abroad was held in check by concerns over the situation in the Middle East.

In addition, the Turkish Exporters' Assembly (TIM), said exports in September rose 6.5 percent year-on-year in September, in a release which comes almost a month before the state statistics office. The two sets of data normally match.

The state statistic data out on Tuesday showed just a 2.9 percent increase in exports in August, and a widening of the current account deficit.

The release of the survey had little impact on Turkey's financial markets.

Istanbul's main share index rose 0.22 percent to 75,109 points on Wednesday, outperforming broader emerging markets which were down 0.26 percent.

There were no trades yet in the 10-year benchmark bond on Wednesday.