Turkish Central Bank head challenges US dollar: Invest in lira in 2012

Central Bank Gov Başçı declares strong commitment to the lira, claiming the currency will be among those rising most this year. Turkey can attract foreign financing as investors are in search for safe havens, he says

The Turkish Lira will be one of the currencies appreciating most in the world this year, according to Central Bank Gov. Erdem Başçı.

“Those who invest in the lira will always gain in 2012. The Central Bank will allow the lira to appreciate this year,” Başçı said Jan. 6 at a conference in Bursa, an industrialized province in northwestern Turkey.

The bank used direct dollar sales as a strong and defensive monetary policy instrument, the governor said, and will keep on using daily dollar auctions to support the lira to gain value.

Turkey’s Central Bank sold $200 million for liras in three auctions and a direct sale on Jan. 6 that it says may be held over and above a regular daily auction of dollars to help tighten liquidity. The bank offers as much as $1.35 billion in the regular auctions on days which it calls extraordinary. 

Turkey’s Central Bank also intervenes in the currency market with undeclared direct dollar sales. The bank sold a total of $3.7 million in four consecutive trading days starting from Dec. 30, 2011, according to estimations by the trade strategists.

The lira declined 18 percent last year, a depreciation the bank triggered and allowed until it threatened to push up the inflation rate, Başçı said.

Inflation in 2012 will be a little over 5 percent, the official target, and keeping the inflation down is the Central Bank’s primary goal, he said, opposing many analysts who think it is not achievable.

Economy not overheating

The Turkish economy is not overheating, according to the governor. If the credit growth rate stays around 10 percent in 2012, there will not be such a risk, he said, naming the bank polices as “successful” in bringing down the current account deficit.

The world is abundant in short-term financing, he said, adding that European, American, Japanese and British central banks provide this financing opportunity, as well as Asian countries with high level of savings.

The growing current account deficit, a much debated risk in the Turkish economy, stems from abundance and cheapness of credit and foreign financing, said Başçı, adding that this was the rationale why there was no reason for the lira to depreciate this year.

“Money is looking for safe havens,” the governor said. “The number of safe havens is decreasing one by one. In a world like this Turkey will find external financing, and it is finding it.”

07.01.2012
SOURCE: HDN