UPDATE 2-Turkish lira subdued after Istanbul blast as global markets edge up

(Adds quotes, recasts on Istanbul blast)

ANKARA, Jan 12 (Reuters) - The Turkish lira lagged an emerging market recovery on Tuesday, staying under pressure after a deadly bomb blast in central Istanbul rattled investors but failed to cause sharp losses.

The lira briefly dipped to 3.0488 per dollar, its lowest since September after news broke of the suicide bombing in Turkey’s biggest city, which killed at least 10 people.

Elsewhere in emerging markets, worries about the Chinese economy eased and most currencies made gains.

The lira recovered some ground to 3.0291, but was marginally down from 3.0250 late on Monday. Market players suggested there was no sharper drop because a degree of political risk was already factored in.

“There wasn’t a sustained negative impact in the market probably because the current levels of the exchange rate already include a certain risk premium,” said Deniz Cicek, economist at Finansbank.

Turkey’s main BIST 100 share index also turned negative after the attack before recovering and traded 1.25 percent higher by 1340 GMT at 71,936.28 points, tracking other equity markets.

A trader noted Tuesday’s explosion was not on the scale of the Ankara bombing in October, which killed more than 100 people, “so after the initial reaction the lira traded in line with emerging markets”.

However, unlike bomb attacks in Turkey last year, it had appeared to target tourists.

Some analysts said further lira depreciation was likely, due to the unfavourable broad economic backdrop.

“The negative effect of the terrorist attack ...has been short-lived but the general mood in the market is lira-negative,” said XTB Securities in a note.

It said it expected the currency to drop to 3.05-3.07 before the end of the week.

The benchmark 10-year government bond yield stood at 11.31 percent, flat from Monday’s close. (Additional reporting by Daren Butler; editing by John Stonestreet)