The Turkish lira fell against a strong dollar on Friday, holding above recent lows after the central bank cut the size of its repo auctions and signalled it might narrow its interest rate corridor, which boosted bonds. Istanbul's main stock index was 1.04 percent up at 61,916 points, outperforming a 0.29 percent decline in the MSCI emerging markets index.
A confidence survey indicating that consumers remained pessimistic in their expectations added to indications that the Turkish economy is slowing. By 1024 GMT, the lira traded at 1.7997 versus the dollar, down from 1.7966 late on Thursday but well above Wednesday's seven-week low. "The central bank's liquidity reduction may help the lira but if there isn't a significant recovery in global markets we don't expect the lira to firm much," said Tufan Comert, strategist at Garanti Securities.
The bank sought to underpin the local currency by tightening lira liquidity, cutting total funding in one-week and one-month repo auctions to 45 billion lira on Friday from 51 billion in early March. The lira touched it weakest level since January 25 at 1.8140 in after-hours trade on Wednesday, dragged down by concerns about Turkey's bloated current account deficit and by a global dollar recovery. Against its euro-dollar basket, the lira traded at 2.0757, slightly weaker than 2.0735 on Thursday.