Turkish lira hovers near record low ahead of cenbank rates decision

Credit: REUTERS/MURAD SEZER

The Turkish lira hovered near a record low against the U.S. dollar on Thursday, as investors cautiously awaited the outcome of a central bank policy meeting, which was expected to leave its key interest rate on hold.

ISTANBUL, Sept 24 (Reuters) - The Turkish lira hovered near a record low against the U.S. dollar on Thursday, as investors cautiously awaited the outcome of a central bank policy meeting, which was expected to leave its key interest rate on hold.

A Reuters poll of 17 economists showed the bank was seen keeping its one-week repo rate steady at 8.25%. Three economists expected a rate hike, with the estimates ranging between 100 basis points and 150 basis points.

At 0551 GMT, the lira TRYTOM=D3 was at 7.7000 against the dollar, trading near an all-time low of 7.7090 which it hit on Wednesday, before it closed at 7.7030.

The currency has been among the worst performers this year, down 22% on worries about Turkey's depleted forex reserves and sharply negative real interest rates. It has shed half its value in less than three years.

The central bank, which is set to announce its rates decision at 1100 GMT, has held the rate steady at 8.25% at its last three meetings, following a nearly year-long easing cycle that saw the policy rate cut aggressively from 24%.

Instead of a formal hike, the central bank has resorted to back-door methods to tighten policy, using liquidity measures and directing lenders to borrow at a higher rate. Analysts say the bank is under political pressure not to hike rates.

Some economists say the bank could lift a secondary rate, the late liquidity window, from 11.25% to create more space for backdoor credit tightening that has lifted the average cost of funding CBTWACF= to 10.65%.

The currency found some support as senior European Union diplomats and officials said on Wednesday the bloc was unlikely to follow through on a threat to impose sanctions on Turkey, after Ankara agreed to talks with Greece over maritime claims.

(Reporting by Daren Butler; Editing by Rashmi Aich)

((daren.butler@tr.com; +90-212-350 7053; Reuters Messaging: daren.butler.thomsonreuters.com@reuters.net))

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