However, shares slid with the Istanbul index dropping 0.69 percent to 49,836.98 points, led lower by a 1.9 percent fall in banks and underperforming a firmer MSCI emerging markets index. The index dipped below 50,000 points for the first time since November.

The lira, which lost almost 20 percent of its value to be one of 2011's worst-performing emerging market currencies, had firmed below 1.87 in early trade and stood at 1.8725 against the dollar at 1540 GMT, strengthening slightly from 1.8785 on Friday.

"The lira is trading pretty well with the central bank's support. In supporting it, aside from intervention, it is of great importance that the central bank governor spoke so firmly and self-confidently," said the forex desk manager at one bank.

Governor Erdem Basci said on Friday the central bank will support lira appreciation in 2012, with its main priority being to contain inflation at stable, low levels.

Up to the end of last year, the bank sold some $11.2 billion in forex-selling auctions launched on Aug. 5. Auction sales so far this year have amounted to $900 million.

A Reuters poll of 30 analysts last week showed the lira is expected to strengthen slightly to 1.86 to the dollar in three months, 1.80 in six months and 1.76 in a year.

Basci had said the bank may normalise monetary policy this week and resume funding at a rate of 5.75 percent from Monday after what were regarded as "exceptional" circumstances last week.

However, instead of opening a 5.75 percent repo, it held another intraday repo on Monday and also held two intraday forex-selling auctions of $50 million volume each - signalling another "exceptional" day.

The bank has not spelled out exactly what circumstances necessitate "exceptional day" treatment but its decision on this is seen as linked to lira liquidity and forex market conditions at the time.

The yield on Turkey's benchmark bond maturing on Dec. 4, 2013 fell to 11.42 percent from 11.49 percent on Friday.

Since October the central bank has tightened policy and has for now effectively mothballed the low 5.75 percent policy rate and widened the gap between overnight lending and borrowing rates. The bank also tightened lira liquidity in the market by reducing the repo auctions amount which increased the funding costs of banks by 400-450 basis points.

Data on Monday illustrated a slowdown in the economy after growth expected to have amounted to around 8 percent last year. Industrial production expanded 8.4 percent year-on-year in November, below a 9.6 percent poll forecast, and declined 2.5 percent month-on-month on a seasonally-adjusted basis.