Turkey's lira weakened against the dollar on Friday, giving up some of the previous session's gains, when it rallied after the central bank raised interest rates more than expected. Bank stocks tumbled more than 2 percent after Moody's downgraded its ratings on 17 Turkish lenders, citing concern about the rising cost of their foreign currency funding, given the sell-off in the lira.
The lira has weakened some 15 percent this year, hit by concern about President Tayyip Erdogan's grip on monetary policy ahead of June's elections. But the central bank's aggressive rate hikes - it has now tightened by 4.25 percentage points in just over two weeks - appear to have calmed the market.
"Turkey are changing their tune, which is a good thing," said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers. "But I am concerned about what happens after the election because the underlying problems are not being sorted."
The lira stood at 4.4883 against the dollar at 1216 GMT, easing from a close of 4.4850 on Thursday. It remains well off a record low of 4.9290, which it hit on May 23.
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