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    Turkish lira extends its fall against dollar trades at 27-month low

    HotNewsTurkey Staff
    22.10.2008 - 09:35 | Son Güncelleme:

    The Turkish lira extended its fall against the U.S. dollar and shed more than 5 percent, hitting a new 27-month low as investors continue their sell-offs of local currencies in emerging markets. (UPDATED)

    The lira traded above close to1.65 levels in the afternoon trade after opening at 1.62 levels in the early morning trade. The lira had also fallen more than 4 percent on Tuesday. 

     

    Bond yields also rose sharply by some 5 percent and climbed over 23 percent while the stocks declined more than 4 percent in Wednesday trade.

     

    The rise in the dollar's price is mainly due to the exodus of funds from emerging markets and the redemption of hedge funds, Nurhan Toguc, chief economist at Yapi Kredi Bank told HotNewsTurkey. 

     

    "The strengthening of the yen against the U.S. dollar points at a dying trend of carry trade. This hits the lira and lira-denominated investment instruments," she said.

     

    However, she said they were not expecting Turkish Central Bank to hike the interest rates to limit the rise in the currency. The bank is expected to announce its decision on late Wednesday.

     

    Global investors have borrowed in low-yielding yen to invest in high-yielding lira and other emerging market currencies in what is called carry trade flows.

     

    Hedge funds are closing their positions to liquidate their assets and this contributes to the dollar's rise, Tolga Senefe, the head of Treasury of Anadolu Bank also said.

     

    Senefe however said the dollar has reached a critical level that would benefit from intervention from the central bank.

     

    "The dollar had reached levels that the central bank could intervene. The markets are expecting the central bank to step in," Senefe was quoted as saying by hurriyet.com.tr on Wednesday.

     

    The U.S. dollar firmed against the world's currencies benefiting from an ongoing funding demand and rose to its highest since February 2007 against the euro. The euro fell to below 1.29 levels on Wednesday.

     

    Analysts say the euro was being pressured by speculation that the European Central Bank will be forced to lower official borrowing costs to promote growth.

     

     

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