The currency has edged up 2.5 percent this year as sentiment towards Turkey has been particularly strong on the back of upgrades by Moody's and Fitch, and on renewed hopes that Turkey could sign a stand-by accord with the International Monetary Fund, thereby easing its forecast debt roll-over ratio and anchoring fiscal discipline.
However, silence over the IMF loan deal talks may suggest profit-taking in the short term, analysts said. "The rumours for an S&P upgrade did not come true and there is no clarification on the IMF talks, and short dollar positions have started to be closed," said TEB head of fx markets Levent Guven. "The emerging market sentiment was negative yesterday and we of course have been influenced by this too," Guven said.
The main share index lost 0.51 percent to 54,462. The central bank said after markets closed on Thursday that it had left its benchmark interest rates unchanged, as expected, and that rates must remain low for a long time. The bank kept the overnight borrowing rate at 6.5 percent and the lending rate at 9.0 percent after its monetary policy committee meeting.
Economists in a Reuters poll had been unanimous in expecting the bank to keep its benchmark interest rates steady. The government has blown hot and cold on the likelihood of an IMF deal since the last one expired in 2008. Markets are eager for clarity, even though Turkey may not be in urgent need of cash. Some point out Turkey has felt this close to a deal before, only for none to materialise.