Turkish Lira Advances as Central Bank Leaves Rates Unchanged

By Ewa Krukowska

Sept. 19 (Bloomberg) -- Turkey's lira rose against the dollar for a second day after policy makers yesterday kept interest rates at an 11-month high.

The lira strengthened to 1.2644 per dollar by 8:37 a.m. in Istanbul, from 1.2702 yesterday. It climbed to 1.7980 versus the euro, from 1.8255.

The Ankara-based central bank kept the key overnight borrowing rate at 16.75 percent, in line with forecasts by all 18 economists surveyed by Bloomberg. The bank will release minutes of its meeting within eight working days.

The lira lost about 6 percent against the dollar this month, the sixth-biggest decline among emerging-market currencies, as concern global financial turmoil is spreading following the collapse of Lehman Brothers Holdings Inc. sapped demand for higher-yielding assets.

While the Federal Reserve yesterday almost quadrupled the amount of dollars central banks can auction around the world to ease the global financial crisis, none have cut interest rates this week as inflation continues to threaten their economies.

The Turkish central bank will consider ``measured rate cuts'' as long as commodity prices decline and the inflation outlook continues to improve, it said in a statement yesterday. The turmoil on global credit markets demands ``caution in monetary policy decisions,'' it said.

To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net