Lira Leads EM Gains Before Erdogan Announcement: Inside Turkey

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The Turkish currency led gains in emerging-market currencies, as speculation mounted that President Recep Tayyip Erdogan will announcedetails of a major Turkish energy discovery in the Black Sea when he speaks later Friday.

The lira was 0.6% stronger against the dollar at 11:03 a.m. after rising as much as 1.2%. The currency is still down 3.9% this month, making it the worst-performing emerging-market currency after the Brazilian real.

Erdogan is due to hold a press conference at 3 p.m. local time in Istanbul, after officials said that Turkey is in the preliminary stages of conducting an appraisal of a natural-gas find.

Turkey left its interest rate unchanged at 8.25% on Thursday as the central bank looks for a back-door way of containing the currency’s weakness. Minutes after the rate announcement, the central bank said it’s increasing mandatory reserve ratios for lenders that meet certain requirements for credit growth. 0n Friday, it took another step to tighten, raising weekly the lira-dollar swap rate to 9.75% from 8.25%. The average cost of cash provided by the central bank rose to 9.44% on Thursday, from as low as 7.34% in July.

Market Metrics

  • USD/TRY +0.6% at 7.2546
  • 10-year benchmark dollar bond yield 13.21%
  • 5-year CDS down 15.2bps at 547bps
  • Borsa Istanbul 100 Index +1.14% to 1,139.61
  • Brent crude +0.3% to $44.74 per barrel

Key News:

  • All Eyes on Erdogan as Reports of Black Sea Energy Find Mount
  • Turkey Tightens Policy by Stealth and Opts Against Raising Rates
  • Turkey Reconverts Istanbul’s Chora Into Mosque: Gazette

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