ANKARA: The battered Turkish lira was stable on Tuesday after Chinese GDP figures gave a modest boost to emerging markets, and ahead of a central bank meeting later in the day where interest rates are expected to remain unchanged despite high inflation.
Turkey's currency has weakened sharply against the U.S. dollar since late December, when the central bank shocked markets by leaving borrowing rates unchanged, in line with the wishes of President Tayyip Erdogan but fuelling fears over political interference in monetary policy.
Earlier this month the lira broke through 3.0 to the USD, and has remained stubbornly above the symbolic threshold since, weighed down by global market fears.
The lira stood at 3.0230 at 0802 GMT, firming slightly from 3.0321 late on Monday.
The main share index fell 0.03 percent to 71,039.68 points on Monday, but was up 1.01 percent to 71,760.23 in early Tuesday trading.
The central bank has been under political pressure not to raise interest rates despite the lira sliding 25 percent against the dollar and inflation reaching 8.81 percent last year.
A Reuters poll last week of 19 analysts found all but one expect the bank to keep rates on hold when it meets later on Tuesday. Market volatility has increased and the bank has previously said it would only begin simplifying policy once there was a permanent drop in global volatility.
Fears over the bank's dovish stance have pushed up 10 year government bond yields since last month's Monetary Policy Committee meeting, Turkish bank TEB said in a morning briefing note.
"Any dovish tilt in the MPC meeting will likely strengthen this trend to extend further. However, the central bank has been tightening liquidity stance slightly in recent days, which we think lowers the risks over a cut to the upper bound," TEB stated.
China's widely expected Q4 GDP figures will help ease fears of a sharp slowdown in the world's second largest economy, and bolster confidence in emerging markets like Turkey, TEB added.
"(The) MPC meeting will be monitored today. Keeping the current policy setup will likely be neutral initially but the lira will remain vulnerable to further weakness, especially if global backdrop weakens again," TEB added.
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