Data on Friday showed the trade deficit fell to $5.51 billion in October from $8.01 billion a year earlier, far below a forecast of $8.2 billion in a Reuters poll.

 The lira, whose strength has prompted the central bank to warn of the first cuts in its main policy rate, firmed to 1.7842 to the dollar, from 1.7871 late on Thursday. Against the euro-dollar basket, it was flat at 2.0536.

"As the narrowing in the trade deficit will support positive expectations about the improvement of the current account deficit, the central bank would more easily cut its rates," wrote Tufan Comert, strategist at Garanti Securities.

 The yield on Turkey's two-year benchmark bond reached as low as 5.94 percent from a previous close at 5.98 percent.

 Turkey's current account deficit, which because of its dependence on imported oil and gas is the economy's main weak point, reached 10 percent of national output last year.

But the central bank's steady moves to rein in booming domestic demand this year and last have helped reduce the shortfall - to $39.3 billion in the first nine months of the year, from $60.5 billion a year earlier.

 The central bank said at its policy meeting of Nov. 20 it consider a measured cut of its policy rate and overnight borrowing rate, respectively at 5.75 percent and 5 percent, if need be.

 Governor Erdem Basci has said the bank would act swiftly if the real exchange rate reached 120-125 on its index, which currently stands at 117.

 Istanbul's main share index was up 0.23 percent at 72,618 points, underperforming a 0.44 percent rise in the global emerging markets index.