Turkey CB To Back Lira With Forex Sales, Reserve Options

(RTTNews) - Turkey's central bank governor Erdem Basci said on Tuesday that the bank will continue to support the weakening lira using foreign currency sales and reserve options.

In a speech in Ankara, Basci also signaled that the central bank sees the current policy stance as appropriate, but stands ready to make adjustments if needed.

He was speaking at a press conference held to detail the monetary policy for 2014.

The Turkish currency lira is "oversold" now, Basci said. The bank will sell at least $450 million a day in daily forex auctions until year-end. In January, the bank will sell at least $100 million a day and a total of at least $3 billion that month.

The lira strengthened nearly 0.8 percent after Basci's comments and traded at 2.0850 around 9 GMT. The currency hit a record low of 2.09885 earlier today.

Further, Basci said the bank will raise its reserve option coefficients to reduce the tendency of banks to park more lira reserves at the central bank.

Basci expects Turkey's inflation to eased to 7 percent by year-end from November's 7.32 percent. Consequently, annual inflation will be above the central bank's target of 5 percent for the third year in a row.

The lira is exposed to weakness from Turkey's huge current account deficit, threat of capital outflows, and political problems, the latest being a corruption probe launched last week.