Turkish markets firm after central bank vows to defend lira

ISTANBUL Tue Dec 24, 2013 11:03am EST

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ISTANBUL Dec 24 (Reuters) - Turkish markets were buoyed on Tuesday as the lira ended a week of losses after the central bank said it would continue to defend the currency through forex-selling auctions and the reserve option mechanism.

The central bank will sell a minimum of $450 million in regular forex auctions every day until the end of 2013, Governor Erdem Basci told a news conference on Tuesday unveiling the monetary policy for next year.

"We will continue our regular forex-selling auctions and provide a forex liquidity of at least $3 billion until the year-end," Basci said.

The lira firmed to 2.0786 against the dollar by 1545 GMT, versus 2.0950 on Tuesday morning. It hit an all-time low of 2.0983 against the dollar on Friday.

The bank will have sold at least $6 billion by the end of January, through selling at least $100 million every day in its forex-selling auctions.

Already under pressure this year from expectations that the U.S. Federal Reserve would begin to stem a flood of dollars that has boosted global emerging markets, the lira was beaten down further by a corruption probe that saw the arrest of 24 people including the sons of two cabinet ministers.

Turkey is exposed to any tightening of the supply of cash globally as it needs to import almost all of the oil it uses, which gives it one of the world's biggest current-account shortfalls and makes it dependent on capital inflows.

Turkey's main stock index closed 1.34 percent higher at 68,479.37 after sustaining heavy losses last week.

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