* Moody's cites political noise, weaker growth for outlook
* Lira, stocks down, bond yields up after Moody's decision
* Political interference in central bank worries investors
(Adds comment, background)
By Ece Toksabay and Seda Sezer
ISTANBUL, April 11 Turkish assets fell on Friday
after Moody's cut its sovereign rating outlook to negative,
citing political turbulence, external financing pressure and
weaker growth prospects.
The lira weakened to 2.1172 against the dollar
by 1438 GMT from 2.0975 late on Thursday, while bond yields rose
and equities fell.
Moody's said one of the two drivers prompting the change in
outlook was increased pressure on the country's external
financing position driven by "heightened political uncertainty
and lower global liquidity".
The Turkish economy's Achilles' Heel has long been its large
current account deficit, which is running at around 7 percent of
output. Turkey is sensitive to global liquidity conditions as it
has relied on cheap foreign capital to finance the gap.
The gap narrowed to $3.19 billion in February from $4.93
billion a month earlier, slightly above a Reuters poll forecast
for a deficit of $3.05 billion, data showed on Friday.
Given a slowing near-term outlook for economic growth and a
more uncertain policy environment, prospects for
growth-enhancing structural reforms might be diminished, Moody's
A corruption scandal that became public in December has
presented Prime Minister Tayyip Erdogan's government with one of
its biggest challenges during 12 years in power.
His AK Party won local elections on March 30, prompting a
relief rally in markets that viewed the outcome as lowering
political uncertainty, but more elections lie ahead, with a
presidential race in August and parliamentary polls next year.
"Moody's expects these tensions in the political arena to
persist until at least the second quarter of 2015, when
parliamentary elections are due," the report said.
Erkin Isik, strategist at TEB, said a recent easing of
liquidity conditions by the central bank and the subsequent fall
in interbank rates had also left the lira vulnerable.
Erdogan's call last week for rate cuts has also raised
concern about political interference in central bank policy. He
has been a critic of high borrowing costs, fearing they will hit
growth as the country goes to the polls.
Central Bank Governor Erdem Basci hinted at rate cuts for
the first time in a year, three days after Erdogan's call.
"It's worrying that Turkey's central bank is suddenly
striking a much more dovish tone after the elections, calling
into question its independence," said Nicholas Spiro, head of
Spiro Sovereign Strategy.
Turkey's two-year benchmark yield closed up
at 9.94 percent from 9.83 percent on Thursday.
The Istanbul stock market closed down 0.57 percent
at 72,736.33 points, in line with the emerging markets index
, which fell 0.93 percent.
(Editing by John Stonestreet and Angus MacSwan)