The Turkish lira rallied nearly 2% on Friday to its strongest level in a month ahead of a meeting between Turkish President Recep Tayyip Erdoğan and his U.S. counterpart scheduled for Monday. Traders said the meeting raised expectations of a thaw in the chilly diplomatic ties between Ankara and Washington.

The currency firmed as close as 8.2865 versus the dollar, its best since May 11, before slipping to 8.34 by 0906 GMT. It also jumped 2% on Thursday and has gained in five of six sessions after touching a record low last week.

The lira had lagged emerging market peers for months.

But it has broken to the front of the pack in the run-up to the planned meeting between President Erdoğan and U.S. President Joe Biden on the sidelines of the upcoming NATO summit. This will be their first meeting since Biden's election last year.

Several disputes have strained relations, including Ankara's purchase of Russian S-400 missiles that prompted U.S. sanctions that, in turn, have weighed on Turkey's currency and economy.

"In the short term, we can expect the Biden-Erdoğan meeting to continue positive contributions to the Turkish lira and BIST (stock index)," Ünlü & Co said in a client note.

Three traders told Reuters the market rise was in part driven by optimism that Biden and Erdoğan could lift the cloud of sanctions.

"The Biden meeting on Monday is critical ... and the expectation for a positive outcome translated into pricing, causing the lira to appreciate," said a Turkish FX trader.

The lira touched an all-time intraday low of 8.88 last week.

It had fallen for three months due to inflation stuck near 17% and little prospect of interest rate hikes.

Finance Minister Lütfi Elvan said on Friday the fight against inflation "is one that must be won for the future of the country."

Data showed rising expectations for year-end inflation, while separate data showed industrial production remained strong in April.