ANKARA

The Pak Banker - - FRONT PAGE -

Tur­key's cen­tral bank left all its main in­ter­est rates un­changed on Tues­day, cit­ing re­cent volatil­ity in the lira, fi­nan­cial un­cer­tain­ties and ris­ing food prices.

The Mon­e­tary Pol­icy Com­mit­tee held the one-week repo rate at 7.50 per­cent, in line with the me­dian es­ti­mate in a sur­vey of econ­o­mists. The bank also kept its overnight bor­row­ing and lend­ing rates un­changed at 7.25 per­cent and 10.75 per­cent re­spec­tively, ac­cord­ing to a state­ment on its web­site.

Gover­nor Er­dem Basci said July 30 that he could move from his un­ortho­dox in­ter­est rates cor­ri­dor, in­tro­duced five years ago, to a sin­gle-rate pol­icy as early as to­day. De­clin­ing volatil­ity in the U.S. bond mar­ket al­lows pol­icy mak­ers to set a sin­gle short­term bench­mark in­ter­est rate in­stead of the cur­rent daily ad­just­ments, Basci said.

The lira weak­ened af­ter the rates de­ci­sion and was trad­ing 0.4 per­cent lower at 2.8805 per dol­lar at 2:01 p.m. in Is­tan­bul.

Trad­ing the world's most widely used cur­rency pair has be­come a thank­less chore for in­vestors.

The dol­lar has been hov­er­ing around its short- and medium-term av­er­ages against the euro -- near $1.10 per euro -- since late June. An eco­nomic slow­down in China and a com­mod­ity rout have pushed the green­back higher this quar­ter ver­sus most ma­jor peers. Yet it reg­is­tered the small­est move in that time against the com­mon cur­rency amid signs of Euro­pean growth and ex­pec­ta­tions that the Fed­eral Re­serve will take its time in rais­ing U.S. in­ter­est rates.

"I don't think there's any rea­son to bother with it, to be hon­est," Daniel Bre­hon, a New York-based strate­gist at Deutsche Bank AG, said by phone, re­fer­ring to the euro-dol­lar trade. "Our view is look­ing for a hike in Septem­ber, but we're all sym­pa­thetic with the idea that it'll be very slow and it'll be wait-and-see for six months and go again," he said, speak­ing about the Fed's ap­proach to rais­ing rates.

The dol­lar rose 0.3 per­cent to $1.1078 per euro at 5 p.m. in New York. It was lit­tle changed at 124.39 yen. The Bloomberg Dol­lar Spot In­dex, which tracks the cur­rency ver­sus 10 ma­jor peers, rose 0.2 per­cent to 1,210.39.

The euro has been trad­ing along the 50and 100-day trend lines, which are at $1.1082 and $1.1047, re­spec­tively. The den­sity of buy and sell or­ders at $1.10 is about equal, ac­cord­ing to data from Com­merzbank AG, lead­ing to a stale­mate.

Trade bal­ance in the euro area, which was in deficit un­til 2011, rose to a sur­plus of 21.9 bil­lion eu­ros in June.

"You have a trade bal­ance that's bet­ter in the euro zone, they have a cur­rent ac­count sur­plus that's con­tin­u­ing to rise, and growth is a lit­tle bet­ter," Bre­hon said.

Mean­while, Tur­key's cen­tral bank held its key in­ter­est rate on Tues­day, as mount­ing po­lit­i­cal and mil­i­tary con­cerns push the Turk­ish lira to record lows. The cen­tral bank left its main rate un­changed at 7.5 per­cent, as forecast.

Af­ter the de­ci­sion, the lira hit its weak­est ever level against the dol­lar, fall­ing as low as 2.8850, hav­ing traded at 2.8675 be­fore­hand.

In a state­ment, the cen­tral bank said a back­drop of fall­ing food and energy prices, plus do­mes­tic and global mar­ket un­cer­tainty had fac­tored in its de­ci­sion.

"Pro­cessed food and energy price de­vel­op­ments af­fect in­fla­tion fa­vor­ably in the short run, while ex­change rate move­ments de­lay the im­prove­ment in the core in­di­ca­tors," it said.

"Con­sid­er­ing this de­lay and tak­ing into ac­count the un­cer­tainty in do­mes­tic and global mar­kets and the volatil­ity in energy and food prices, the Com­mit­tee de­cided to im­ple­ment a tighter liq­uid­ity pol­icy as long as deemed nec­es­sary." The bank added that fu­ture mon­e­tary pol­icy de­ci­sions would be "con­di­tional on the im­prove­ments in the in­fla­tion out­look."

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