Turkey Business Turkey Central Bank Meets Tuesday, Forex Reserves In Focus
Turkey Central Bank Meets Tuesday, Forex Reserves In Focus
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Turkey's central bank meets to set interest rates Tuesday with the lira touching a near-six month high, stoking speculation that policy makers will boost dollar buying auctions to rebuild reserves and limit the currency's rapid rise.
Economists polled by Dow Jones Newswires unanimously expect no change in the bank's key interest rate level of 5.75% or the flexible rate corridor policy initiated in October which enables the bank its overnight rates are between 5.75% and 12.50%.
But as the lira touched 1.7370 against the dollar Tuesday--its highest level since September 2--analysts are mulling whether Governor Erdem Basci could take advantage of the window in positive sentiment to unveil a series of foreign exchange buying auctions to boost reserves which plunged at the end of 2011, as Ankara fought to shore up the embattled lira.
"We think the bank has no intention to "rock the boat" at a time when things are going their way," said Brown Brother Harriman in a research note. "We see a small but real chance that the central bank will use the positive momentum in global financial markets to announce the rebuilding of forex reserves at or shortly after tomorrow's meeting," the note added.
The prospect of foreign exchange buying auctions marks quite a turnaround for Turkey's central bank. In December Governor Basci was battling to support the lira as it touched 1.9205, a record low against the dollar. The lira was under pressure as markets tested policy makers' resolve to defend the currency amid deteriorating global sentiment and heightened nerves about Turkey's widening imbalances.
To support the lira, the monetary policy committee in December launched a large-scale intervention for only the second time in five years and followed that move with four consecutive interventions of around $4.5 billion, according to traders.
Those moves, alongside daily foreign exchange auctions, saw the bank's reserves fall from a peak of $94 billion to the current level of $77 billion, fuelling market concerns that the lira was vulnerable to a broad sell off.
(source: www.online.wsj.com)
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