ISTANBUL: Turkey's lira weakened around 1% on Monday, as investors eyed the central bank's rate decision this week after the currency rallied as much as 12% last week on expectations of more orthodox economic policy.

Last week's rally was initially sparked by the departure of the central bank governor and the finance minister. A pledge from President Tayyip Erdogan for a new economic model provided further impetus for the currency, which on Monday morning touched its strongest level since Sept. 25.

The lira later weakened as much as 1% to 7.7575 from Friday's close of 7.6800. It stood at 7.7450 at 1140 GMT. Investors are looking ahead to the central bank's rate decision this week, the first under the new governor Naci Agbal, who is seen as a capable technocrat with a more orthodox approach to policy.

The bank, which has mainly used backdoor measures to tighten policy since July, is expected to sharply raise its policy rate to 15%, according to a Reuters poll.

That would in effect be a limited tightening since the weighted average cost of funding has risen to 14.56% due to the backdoor measures. Still, analysts say an outright hike would signal the bank is serious about bringing inflation closer to its targeted range around 5%.

"Markets are giving policymakers the benefit of the doubt now but we think the bank has to deliver an outsized hike to underscore its newfound commitment to orthodox policies," said Win Thin, of Brown Brothers Harriman.

The BIST100 share index rose 0.83% to 1,302 points at 1156 GMT, after touching its highest level on record earlier in the day.

The Turkish central government's budget showed a deficit of 4.89 billion lira in October, data also showed on Monday, for a cumulative deficit of 145.5 billion lira in the first 10 months of the year.