ISTANBUL: Turkey's lira firmed against the dollar on Thursday as the central bank kept interest rates on hold, in line with expectations, although market participants cautioned there could be further weakness ahead.
At 1449 GMT, the lira stood at 5.6250 against the dollar, firming from Wednesday's close of 5.6975. The currency has lost almost a third of its value against the dollar this year on concerns about President Tayyip Erdogan's grip over monetary policy and a rift with Washington.
The bank left its benchmark one-week repo rate unchanged at 24 percent after a mammoth 6.25 percentage point increase last month that has helped the lira recoup some of its losses this year.
"The (central bank), in our view, sees that the recent relief rally could be temporary, that vulnerabilities have not gone away, and that the lira could come under pressure again," Yarkin Cebeci of JP Morgan said in a note.
"The risk is for further hikes on the way especially if the lira gets under pressure as the global environment gets more challenging, political noise increases or inflation continues surprising to the upside."
Inflation surged to nearly 25 percent in September from a year earlier, hitting its highest in 15 years and far higher than the central bank's target of 5 percent.
Inflation will enter a downward trend for the rest of the year, Finance Minister Berat Albayrak said last week supported by the government stimulus encouraging shops to reduce prices by at least 10 percent until the end of the year.
The main BIST 100 share index rose 0.42 percent to 93,093.49 points.
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