Enough Good News in Turkey Inflation Data to Sustain Lira Bulls

(Bloomberg) -- Turkey's lira could have fared a lot worse on Monday given that the country's policy rate fell to the lowest level in four years in real terms after inflation accelerated again. But there was also some good news in the October release.

Producer prices slowed for the first time in nine months and core inflation rose less than the median estimate in a Bloomberg's survey. Meanwhile, accelerating headline consumer inflation drove the one-week repo rate to a negative 124 basis points after adjusting for inflation.

While the lira slipped after the release, trimming a rally that pushed it to the strongest level in three months on Friday, short-term cross-currency swap rates -- a gauge of rate expectations -- hardly budged. That's a sign that September's whopping 625-basis-point rate hike is still anchoring the currency.

The lira was trading 0.7 percent lower at 5.4667 per dollar by 11:33 a.m. in Istanbul amid broad-based dollar gains. The one-year cross-currency swap rate ticked three basis points higher to 24.55 percent, holding close to the August low touched on Friday.

To contact the reporter on this story: Constantine Courcoulas in Istanbul at ccourcoulas1@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Robert Brand

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