Turkish lira hits month-high vs dollar, shares up

At 1235 GMT, the lira was trading at 1.8445 to the dollar, after tightening up as far as 1.8399, compared with 1.8660 in late trade on Wednesday. 
"Sentiment towards emerging markets is improving gradually as investors are looking for high yields that emerging bonds are offering. From this perspective Turkey's bonds are looking attractive," said Piotr Matys, an analyst from 4Cast. 
Against a dollar/euro currency basket, the lira traded at 2.0961, its strongest level in two and a half months, compared with 2.1280 in late trade on Wednesday.   
But analysts said the lira's strengthening could easily be reversed in the risky global environment. 
"The big picture for dollar-lira hasn't changed as the long-term upside trend which has been in place since the end of 2010 prevails. I expect the all-time high at 1.922 to be tested this year," Matys added. 
Foreign inflows towards Turkish markets are estimated to have reached $700-800 million on Wednesday and around $1.5 billion since the beginning of the week, according to some bankers. 
"Foreign investors go mainly to the bond market. We can expect these funds to stay... In the short-term, I expect the lira to firm towards 1.83 versus the dollar. But unless there is a permanent improvement on external markets, these levels won't last," said Tufan Comert, a strategist at Garanti Securities. 
The yield on Turkey's benchmark bond maturing on Dec. 4, 2013 stood at 10.99 percent on Thursday in thin trade, down from a previous close of 11.43 percent. 
Bond yields had risen around 50 basis points after the central bank started to tighten lira liquidity in late December to prevent further lira depreciation, after the currency slid almost 20 percent against the dollar last year. It has now given up those gains. 
Investors were waiting for Treasury auctions to commence on Jan. 17, as the Treasury had planned debt redemptions of 17.8 billion lira versus a domestic borrowing plan of 14.4 billion lira in January.   
The main Istanbul share index was up 1.57 percent at 52,218 points, outperforming the MSCI emerging markets index, which was up 0.72 percent.    
"Continued cheap funding of the central bank and recovery of global risk sentiment are the main reasons pushing shares up," said Ozgur Yurtdasseven, research manager at Garanti Securities. 
Turkey's Central Bank injected 6 billion lira ($3.24 billion) on Thursday through a one-week repo auction at a fixed-rate of 5.75 percent, as it has done at similar auctions since Tuesday.     
Shares in Turkey's Sekerbank gained 12.5 percent to 0.99 lira by 1233 GMT on Thursday after Kazakh bank BTA said it plans to sell its 34 percent stake in Turkey's Sekerbank to its main shareholder, sovereign wealth fund Samruk-Kazyna.