ISTANBUL: Turkey's central bank said on Monday it would shut one of the last windows for lenders to access cheaper funding in its latest effort to support the hard-hit lira, which nonetheless slid for an eighth straight day to a new record low.

In response to what the bank said was another decisive step to maintain stability, the currency briefly rebounded before declining again. It was down 0.5% at 8.43 against the US dollar at 1454 GMT, after having earlier touched an all-time low of 8.444.

The lira is the worst performer in emerging markets this year, down 29% on concerns about possible Western sanctions against Turkey, depleted reserves, high inflation and monetary independence. It has fallen 7% since the central bank held its key interest rate steady last month, bucking wide expectations for a policy tightening that investors and economists say is needed but that is politically unpopular in Ankara.

Instead, the bank has used other tools to tighten money supply and said on Monday that as of Tuesday, borrowing limits at its interbank money market will be reduced to zero. It will also suspend overnight repo transactions via the quotation method against lira-denominated sukuks.

"All tools required within the framework of monetary policy and liquidity management will continue to be used decisively," the central bank said in a statement.

Analysts say that by effectively shutting the overnight lending window, set at 11.75%, the bank will continue to raise the average cost of funding toward the top level of its interest rate corridor, which was raised to 14.75% last month.

Funding costs have jumped to 13.40% from a low of 7.34% in July, when the latest bout of lira weakness began. Inflation stands at 11.75%.-Reuters