Turkish lira off record lows on central bank moves
ISTANBUL Aug 23 (Reuters) - The Turkish lira firmed for the first time in three days on Friday after central bank forex auctions helped steady the currency and as interventions in other emerging markets cushioned investor sentiment towards riskier assets.
A rout in emerging markets, triggered by concern that the U.S. Federal Reserve could reduce its massive bond buying programme as early as next month, eased on Friday as data suggested the global economy is improving.
The lira, buoyed by the announcement of the second $350 million central bank forex auction in as many days, traded at 1.9850 to the dollar by 0750 GMT, firmer than the record low of 1.9933 it hit overnight.
After the release of Fed minutes this week showing its stimulus could soon be withdrawn, the Turkish central bank said it would apply more monetary tightening by not holding one-week repo auctions, halting funding from its policy rate and opening forex-selling auctions of at least $350 million.
The currencies of India, Indonesia, Malaysia and Thailand have all hit multi-year lows. Brazil's real skimmed a five-year low against the dollar.
The central bank in Brazil announced a currency-intervention programme to provide $60 billion worth of cash and insurance to the foreign-exchange market by year-end to bolster the real, further tempering the emerging markets rout.
The move "gets the central bank of Turkey out of a tricky situation," wrote economist Timothy Ash of Standard Bank.
"The Brazilian support ... should provide a bit of short-term relief, but (I'm) not sure if it really will avoid the need in Turkey itself for a more substantive rise in policy rates. It could, though, buy them a bit more time," he said.
Turkey's central bank raised its overnight lending rate, the upper end of the interest rate corridor it uses to control monetary conditions, for a second straight month on Tuesday, hiking it by 50 basis points to 7.75 percent in a surprise move to try to prevent an uncontrolled slide in the lira.
The 10-year benchmark bond yield fell to 9.88 percent from a close of 10.01 percent on Thursday.
The main Istanbul share index rose 0.2 percent to 68,433.89 , underperforming the broader emerging markets index , which rose 0.56 percent.
"Markets are enjoying a bit of a bounce after a sharp sell-off," said Stuart Hackett, director of sales trading at Ekspres Invest in Istanbul.
"Turkish markets have been hit much harder than other emerging markets due to ... the effects of the Fed's tapering, because it's a high beta market and concerns about geopolitics." (Writing by Ayla Jean Yackley; Editing by Nick Tattersall)
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