ISTANBUL: The Turkish lira hovered near a six-month low as investors awaited an interest rate decision on Thursday and watched for any signs of spillover from US and Arab air strikes on Islamic State militants in neighbouring Syria.
The United States and Gulf Arab allies carried out at least 50 air strikes on Islamic State targets in the Syrian provinces of Raqqa and Deir al-Zor on Tuesday, a group monitoring the war in Syria said.
Turkey was not directly involved in the military action, but Islamic State advances in Kurdish parts of northern Syria have come close to its border and led to an influx of tens of thousands of refugees in recent days.
Turkish government officials have warned that tensions in Iraq and Syria, as well as Ukraine, combined with slower growth in Europe, could hit the Turkish economy, putting pressure on the central bank to lower interest rates and support growth.
The bank last month unexpectedly lowered its overnight lending rate, in a move seen as having little easing impact and being more a signal to a government keen for rate cuts that it is supporting the economy.
The bank is also battling stubbornly high inflation.
All 14 economists in a Reuters poll forecast no change in the one-week repo rate on Thursday, with only two predicting a 50 basis point cut.
One economist predicted a 25 basis point cut in the overnight lending rate.
"A further reduction in the upper bound would leave the lira even more vulnerable to adverse developments in global financial markets," said Erkin Isik, a strategist at TEB-BNP Paribas.
Turkey is susceptible to changes in global liquidity conditions due to its large current account gap, which was easier to finance during the years of cheap US funding.
Market also monitored treasury auctions later on Tuesday.
The lira was at 2.2335, near its weakest since end-March earlier this year, and compared with 2.2440 late on Monday.
The benchmark 10-year government bond yield was at 9.51 percent, unchanged from a day before.
Istanbul's main share index was up 0.75 percent at 77,443.83 points, compared with a 0.47 percent drop in the emerging markets index.
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