ISTANBUL: The Turkish lira weakened marginally against the dollar and bond yields inched down on Tuesday after the central bank opted to provide cheap liquidity for the market.
Bonds continued to draw support from benign inflation data released on Monday, while equities were trading just above flat following the recovery in global markets, analysts said.
By 0750 GMT, the lira traded at 1.8498 versus the dollar , slightly weaker then 1.8471 late on Monday. Against its euro-dollar basket it steadied at 2.0765.
"The lira slightly eased following the central bank cheap repo auction," said a treasury manager of a brokerage house. "But as long as the euro-dollar exchange rate rises, the dollar buying versus the lira should remain limited."
The Turkish Central Bank opted to provide lira liquidity to markets through a cheap repo auction where the rate was fixed at 5.75 percent.
Last week the central bank held a more expensive intraday repo, charging borrowers a higher rate, to help the lira recover from 1.88 per dollar, its weakest rate since mid-January.
In order to slow an overheating economy and counter inflation and a large current account deficit, the bank has since late 2010 been implementing a policy mix based on daily liquidity injections, high reserve requirement ratios, and adjusting its overnight borrowing and lending rates - known as the interest rate corridor.
Data released on Monday showed annual inflation slowed to 8.28 percent in May, from 11.1 percent in April. The bank said on Tuesday that the dip was driven by the positive trend in unprocessed food prices and a global decline in energy prices.
"Investors continue to buy bonds after lower-than-expected inflation data. The yield dipped sharply to 9.20 percent after the resistance of 9.30 percent was broken on the down side. Global prospects for another round of quantitative easing also support bonds," said the treasury manager by adding markets will monitor G7 meeting.
The yield on Turkey's benchmark bond maturing on March 5, 2014, edged down to 9.22 percent from a previous close at 9.25 percent.
Finance chiefs of the Group of Seven leading industrialised powers will hold emergency talks on the euro zone debt crisis on Tuesday.
Istanbul's main stock index were 0.47 percent up at 56,006 points, in line a 0.45 percent rise in the MSCI emerging markets index.
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