ANKARA: The Turkish lira fell further against the dollar on Wednesday, despite assurances by the central bank and amid tension over Syria.
The lira fell to 2.07 to the dollar in afternoon trading, then regained some ground to close at 2.0605, from 2.0382 at Tuesday's close.
The Istanbul stock market edged down by 0.10 percent, having dropped by 4.73 percent Tuesday, 1.24 percent on Monday and by 6 percent last week.
The lira has fallen slightly more than 13 percent since the beginning of the year.
Assurances Tuesday from the head of the central bank Erdem Basci that the lira could rally to 1.92 to the dollar, or even stronger, at the end of this year did not convince the markets.
After Basci's comments, the lira continued to sag, although the yield on 10-year government bonds fell and ended the day at 9.82 percent.
The yield on 10-year government bonds had surged to 10.58 percent last week on the secondary market.
The prospect of war in neighbouring Syria is also weighing on sentiment.
Foreign Minister Ahmet Davutoglu said in remarks published on Monday that Turkey would join an international coalition against Syria even if the UN Security Council failed to reach a consensus.
Turkey the second biggest military force in NATO shares a 910-kilometre (560-mile) border with Syria and has taken in around 500,000 refugees from the conflict.
Economy Minister Zafer Caglayan on Tuesday dismissed the concerns and said Ankara's involvement in an anti-Syria coalition would not have a "direct impact" on the Turkish economy.
In his speech Tuesday, Basci ruled out any increases in interest rates but signalled that the bank would take bold action to defend the lira by using its official reserves.
He said that the central bank has a war chest of about $40 billion, and it is estimated that the bank has spent at least $8.0 billion in attempts to support the lira since June.
On Wednesday, the central bank sold $50 million.
However investors were not reassured as foreign exchange sales can only be a short-term defence of the currency, according to columnist Ugur Gurses of the Turkish daily Radikal.
"As Basci was speaking yesterday, the Turkish currency rapidly slumped. Perhaps it was the most unfortunate moment for a central bank chief," he wrote.
At Capital Economics in London, economist William Jackson suggested that the bank might try new measures or capital controls, adding that if financial market tensions eased, nothing may be introduced.
But he did not rule out "more aggressive" foreign exchange sales or further hikes in the overnight rate.
On August 20, the central bank ramped up its overnight rate by half a point to 7.75 percent.
Jackson said the possibility that the central bank may resort to more creative measures underlined "how vulnerable Turkey is to a slowdown in capital inflows due to its large current account deficit and low FX reserve coverage."
Turkey is being battered by an exodus of capital from emerging economies in Asia, Latin America, Russia and South Africa as investors pull out some funds after signals of a tightening of US monetary policy.
But analysts say its economy is fragile because of its dependence on credit and the wide current account deficit that has financed with short-term foreign funding.
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