The Turkish lira rose slightly on Tuesday after plunging to a record low against the dollar, as investor expectations increased for the central bank to adopt unofficial monetary tightening steps ahead of a rate-setting meeting this week.
The lira was trading at 7.3890 to the dollar by 05:33 GMT, slightly higher than Monday's closing level of 7.3930, and the currency hit a record low of 7.40 during Monday night and then rose to 7.3690.
The currency fell in eight of the past nine trading sessions, mainly due to concerns about depleting the hard currency reserves of the central bank, costly intervention in the exchange market and increasing demand for hard currency in the country.
With the lira's decline, analysts' expectations of an interest rate increase have grown, but the central bank has so far resorted to informal measures to tighten monetary policy, including moves on the liquidity front and directing lenders to borrow at a higher rate.
A Reuters poll showed that, despite expectations that the central bank will keep the interest rate stable this week, it is expected to pay the cost of financing the rise through informal measures.