ISTANBUL: The Turkish lira hit its strongest level in five months against the dollar on Monday and stocks neared six-month highs led by banking shares as the central bank increased available funds in the markets, while data showed Turkey's debt stock had declined.
The Turkish Central Bank injected 7 billion lira ($3.99 billion) into the market via a one-week repo.
By 1558 GMT, the lira traded at 1.7398, after firming to 1.7360, its strongest level since Sept. 2 and compared with 1.7555 in late trade on Friday.
"The central bank's liquidity injection is the latest concern for forex investors right now. The global risk appetite on expectations of a Greece deal and the policy easing from China were the main supporters of the lira today," said a forex trader of a bank in Istanbul.
The lira has firmed more than 7 percent versus the greenback so far this year due to tight monetary policy and a revival of global risk sentiment.
"I expect the lira to move slower than its peers, to 1.7050-1.71. The main risk in the short-term would be an Iranian cut-back on oil supply," the trader said.
Against a euro-dollar basket, the lira stood at 2.0236, after touching its strongest level since late July of 2.0178 and compared with 2.0318 in late trade on Friday.
The main Istanbul share index closed 0.55 percent up at 61,4494.07 points, approaching its highest level since early August and outperforming a 0.39 percent rise in the MSCI emerging markets index.
"The rally in equities started with the central bank's liquidity easing as it reduced pressures on banking shares. There is also the positive effect of the European Central Bank's liquidity easing," said Alper Erginol, assistant research manager at Oyak Securities.
Banking shares, which make up roughly one-third of the main Istanbul index, closed 0.54 percent up on Monday, rallying more than 21 percent so far this year.
Since Jan. 10, the central bank has been easing liquidity and funding costs for banks, by holding regular one-week repo auctions at a low rate.
Turkish media company Dogan Yayin Holding closed 7.35 percent up at 0.73 liras.
"There has been no specific development at Dogan Yayin Holding. Its shares had been underperforming the general index despite their capacity to increase. So now the shares are catching up," Erginol added.
The yield on Turkey's benchmark bond due December 4, 2013 closed at 9.14 percent, down from a previous close of 9.21 percent.
Analysts noted that the central bank's liquidity easing is also encouraging banks to buy more bonds.
The Turkish Treasury said on Monday it had mandated foreign banks to explore bond issuance opportunities in the JBIC guaranteed Yen market. No further details were immediately available.
Turkish markets shrugged off data showing that central government debt stock had fallen to 514.8 billion lira ($293.79 billion) as of end-January.
Turkey has pursued a strict fiscal discipline since the 2001-2002 crisis, reducing the country's EU-defined debt stock to gross domestic product ratio from 74 percent in 2002 to 42.2 percent in 2010.
The ratio is expected to decline to 39.8 percent in 2011 and to 37 percent at end-2012, according to the government's medium term programme.
Turkish Finance Minister Mehmet Simsek told Reuters that the government is looking into the possibility of taxing bank deposits depending on their maturity.
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