Lira to gain ground against other currencies: Experts

ISTANBUL

The value of the Turkish lira will be higher in the weeks and months to come following hints by the Turkish Central Bank at liquidity tightening, economic analysts said Tuesday.

The lira has lost more than 20 percent of its value against the U.S. dollar since last November.

However, the currency rebounded to under 3.78 on Tuesday from over 3.80 on Monday, as many analysts said that the worst for the lira was over for the near future.

Central Bank Governor Murat Cetinkaya said Tuesday that the bank may implement additional monetary tightening “if needed”.

"The necessary liquidity measures will be taken in case of unhealthy pricing behavior in the foreign exchange market that cannot be justified by economic fundamentals," he said.

Burcin Metin, the head of ING’s foreign exchange desk, said the bank's intention to implement additional monetary tightening “if needed” made a positive impression on the market.

"Last year was very bad for us," he said. "The Turkish lira negatively separated from other emerging market currencies. In this sense, the bank's measures will be effective to strengthen the Turkish lira against foreign currencies."

Metin stressed that the last two days had seen significant foreign currency inflows to Turkey. "We think that this will continue and the dollar/lira exchange rate may decline to the 3.60 level in time," he added.

"Within the next two or three months, there will be a positive atmosphere in the market and the Turkish lira will show a better performance compared to other emerging market currencies."

Ziraat Bank economist Bora Tamer Yilmaz sai: "I think stronger lira predictions are realistic. Because the Central Bank is aiming to reduce the volatility in foreign exchange rates and as a result of its actions volatility declined to 17 percent from around 25 percent in mid-January.

"Foreign exchange rates will be stable and the lira will gain ground against foreign currencies as long as the Central Bank keeps volatility low."

Yilmaz stated that the bank's messages at the inflation report meeting on Tuesday suggested a tight monetary policy and taking inflation targets seriously -- providing further support to the lira.

Reporting by Handan Gunes and Burhan Sansarlioglu; Writing by Muhammed Ali Gurtas,Bahattin Gonultas