Turkish shares dropped 1.72 percent, dragged down by banking stocks, while bond yields were virtually flat in low volumes. The lira closed at 1.7530 versus the dollar compared with Friday's close at 1.7501. Demand for the currency is The lira had strengthened to its highest level in 1-1/2 months at 1.7425 last Thursday after the central bank unveiled a strategy to bolster the currency, that partly hinged on tightening liquidity. The central bank, however, also announced a cut in lira reserve requirement ratios to partly offset the impact of tighter liquidity. "The central bank's policies create ambiguities. The liquidity and the cost of the lira is very uncertain. Investors prefer to wait before entering into the money market," said a manager of the treasury marketing unit of a bank in Istanbul. "The bank's failure to open the forex auction and tighten the liquidity weakened the lira today," he said. Demand for the lira is expected to increase in the run-up to public holidays on Nov. 7-9. The Turkish central bank did not hold a foreign exchange auction on Monday and it provided in total 29 billion lira ($16.6 billion) to the market via two repo auctions while draining 14 billion lira ($8 billion). Against a euro-dollar basket , the currency strengthened to 2.1007 on Monday compared with a previous close of 2.1030. It had traded as high as 2.0909 on Oct. 26, its strongest level in a month. The main Istanbul share index closed down 1.72 percent at 56,061.47 points, pulled down by a 2.4 percent drop in the banking share index on expectations of weaker profits. Turkish shares underperformed the MSCI emerging markets index which fell 1.48 percent. "External sentiment is negative. Besides, some foreign research houses are underweight Turkish shares. The ambiguity of rates and expectations of weak third-quarter financials pushed banks' shares down," said Hasan Demirtas, analyst at Tera Securities. Turkish banks are forecast to post third quarter net profits 10 percent lower on average than the same quarter last year, due partly to trading losses and seasonally low fee generation during July-September. The yield on Turkey's benchmark bond maturing on July 17, 2013 closed at 9.74 percent in very low volumes, little changed from a previous close of 9.76 percent. The Treasury's borrowing programme did not affect the bond market. The Turkish Treasury said on Monday it estimated the domestic debt rollover ratio at 86.2 percent for end-2011 and at 83.5 percent for end-2012. "The lira denominated 2-year fixed rate coupon "benchmark bonds" will be issued every month," the Treasury said in its 2012 financing programme. "For a long time the benchmark bond was the zero coupon bond having the longest maturity. The Treasury is making a major change. It can push investors to buy the benchmark bond," said Tufan Comert, strategist at Garanti Securities.