The Turkish lira firmed against the dollar on Monday, finding support from last week's central bank decision to keep interest rates on hold and after the U.S. Federal Reserve chief left the door open to further help for the world's largest economy.
Volumes were limited ahead of this week's public holiday. Markets will be closed from midday on Monday until Friday for a holiday to mark the end of the Muslim fasting month of Ramadan. A London holiday was seen further depressing volumes.
Fed chief Ben Bernanke on Friday stopped short of detailing further action to boost the U.S. recovery but said the central bank would consider what more it could do to fight high unemployment, giving some comfort to investors.
The lira firmed to 1.7470 against the dollar from 1.7520 on Friday.
The Turkish currency was also helped at the end of last week by a narrower-than-expected trade deficit.
However, the currency has weakened 12 percent against the dollar this year, and a substantial recovery is not expected in the near term.
"The lira has underperformed its EMEA peers (this year) and is likely to remain on the back foot as the central bank keeps ultra-loose monetary policy in place," Traditional Analytics said in a note.
While the Turkish central bank decision to leave rates on hold helped the lira, its bias towards a looser policy may exert renewed pressure on the currency in the period ahead.
The bank said on Friday it could cut rates and loosen reserve requirements if the slowdown in domestic economic activity became more pronounced.
Markets on Monday will monitor the Treasury's release of its domestic debt programmfor September-November.
The benchmark May 15, 2013, yield <0#trtsysum=ıs> eased to 7.95 percent from 7.97 percent on Friday, when it rose after central bank minutes from its MPC meeting showed the bank expects core inflation indicators to rise temporarily.
Turkish shares rose 0.24 percent to 53,839.08 points on Monday, underperforming the MSCI emerging markets index, which rose 1.8 percent.
Shares in Turkish Airlines were down 2.07 percent at 2.36 lira after it announced a larger-than-expected second quarter net loss of 220.6 million lira ($126 million).