ISTANBUL: Turkey's lira hovered around three week highs on Friday, after markets welcomed the central bank's decision to tighten policy to rein in inflation.
Having faltered slightly on Thursday because of the uncertainty over when the US Federal Reserve will begin reducing its massive bond buying programme, the lira on Friday had firmed to 2.0112 to the dollar by 1457 GMT from 2.0222 late in the previous session.
It had started the week around 2.0290. On Wednesday, a day after the decision to cease one month repo auctions but keeping official rates on hold, the Turkish central bank told economists it would focus on fighting inflation, albeit through what effectively amounts to covert interest rate hikes.
The bank has so far refused to increase the policy rates, even in the face of a potential imminent cut in the Fed's programme that has flooded emerging markets with cheap funding.
Reversing Thursday's losses, Istanbul's main stock index rose 1.43 percent to 75,743.94 points, outperforming the broader emerging market index, which rose 0.5 percent.
The yield on Turkey's 10-year benchmark bond rose to 9.22 percent from 9.2 percent at Thursday's close.
Markets were largely unmoved by the affirmation of Turkey's credit rating by S&P, at "BB+" sovereign credit rating with a stable outlook.
Some analysts said local market focus would be on Treasury cash balance and inflation data at the start of next month. "There is no important data at home or in major markets today and sentiment is less likely to change significantly before the important data releases in the first week of December," a note from Istanbul based TEB said.
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