December 28, 2011 / 9:16 AM / in 7 years

Turk lira gains vs dlr, shares slip in thin trade

* Lira slightly stronger against dollar, shares down

* Bond yields steady

* Extremely thin volumes

* governor speech eyed at 1300 GMT

ISTANBUL, Dec 28 (Reuters) - The Turkish lira recovered slightly against the dollar while shares edged lower on Wednesday in thin cautious trade with many market players away as investors awaited a speech by central bank Governor Erdem Basci.

Basci will make a speech at 1300 GMT at a conference in Istanbul about the effects of the bank’s policies on the Turkish economy.

By 0821 GMT, the lira stood at 1.8991 versus the dollar, compared with 1.9008 on Tuesday afternoon.

Against its euro-dollar basket, the lira traded at 2.1906, compared with a previous close of 2.1884.

“The fact that the central bank will sell less dollars at its forex auctions could exert pressure on the lira. We can’t say anything positive about the lira in the short term,” said a forex trader at one bank.

During a presentation of monetary policy for 2012 on Tuesday, central bank governor Basci said the bank will continue to provide forex liquidity to the market, specifying that the amount of forex to be sold at auction would be lower in the forthcoming period barring extraordinary conditions.

Basci also said the bank would continue to use reserve requirement ratios and its interest rate corridor as policy tools while global uncertainties remained, sticking to an unorthodox policy mix, as had largely been expected by analysts.

Istanbul’s main share index was 0.28 percent lower at 52,412 points, outperforming the MSCI emerging markets index , which was down 0.61 percent.

“For the day ahead, we expect Turkish stocks to follow the losses in Asian markets,” wrote analysts of Alkhair Capital.

The yield on Turkey’s benchmark bond maturing on Dec. 4, 2013 traded at 10.78 percent in early over-the-counter trade, virtually unchanged from a previous close of 10.80 percent.

Concerning the central bank’s announcement on Tuesday that it would start to hold one-month repo auctions on Dec. 30, a fixed-income trade at one bank commented: “If the bank tightens primary dealers’ repo facility for the same amount provided by the one-month repo auction, it would be positive for the market.”

“But if it tightens one-week repo facility volume, it would be negative. It will be clearer when the auctions start.”

Basci said the bank’s record low 5.75 percent policy rate could be adjusted if necessary and it could extend the maturity on repo auctions up to three months. (Writing by Seltem Iyigun; editing by Stephen Nisbet)

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