World stocks slipped after US data showed employers hired the fewest number of workers in nine months in June, dashing optimism the economic recovery was regaining momentum.

By 1238 GMT the lira had weakened to 1.6290 per dollar from 1.6221 before the US data and from a previous close of 1.6360.

The lira has gained since late on Thursday after JP Morgan said in a report that the currency had been oversold. Early last week it touched its weakest level in 26 months at 1.6520.

Turkey’s industrial output rose 8 percent on the year in May, slowing slightly from April’s growth rate but exceeding a consensus forecast, signalling attempts to cool the economy are still largely ineffective.

The median forecast in a Reuters poll of 14 analysts was for growth of 7.15 percent after an 8.3 percent expansion in April.

“Although second-quarter GDP growth is likely to be flat following a stronger-than-expected first-quarter GDP reading, there are signs suggesting that economic activity in the third quarter will be reasonably strong ... Turkey is set to experience robust GDP growth this year, intensifying overheating concerns,” said Ilker Domac, regional head of economics at Citigroup. 

“With the general elections behind us, the focus turns to the nature of the likely package to be introduced by the new government, as the central bank continues to maintain its dovish stance.”

Concerns the economy is overheating, doubts over the central bank’s reluctance to raise interest rates despite strong growth and a weak global backdrop have all weighed on Turkish assets this year. The lira has lost around six percent of its value to the dollar since the start of 2011.

Turkey has recently lost its status as a darling of emerging market investors, due to a gaping current account deficit and unorthodox monetary policy measures.

Turkish Prime Minister Tayyip Erdogan said on Friday that Turkey would continue to closely monitor the current account deficit. Exports would exceed $130 billion this year, he said and the government would develop nuclear and renewable energy in Turkey to help reduce the fuel bill.

Analysts had speculated that only a rate hike would help the currency to regain momentum.

However, a drop in inflation this month reduced the likelihood of any imminent rate hike — adding to the lira’s weakness although it boosted bonds.

Turkey’s benchmark bond yield fell below 9 percent this week after the central bank said a slowdown in domestic demand had reduced the need for more monetary tightening.

“The Turkish market is up because there is nothing bad to price in the market and investors figured out that at least for another two or three months the central bank won’t do anything but just wait,” said Altug Dag, a trader at EFG Istanbul Securities.

The yield on Turkey’s benchmark Feb. 20, 2013, bond fell to 8.91 percent from a close of 8.97 percent on Thursday.

In the central bank’s twice monthly survey of analysts’ expectations released on Thursday, year-end inflation was seen at 7.25 percent, falling from a forecast of 7.61 percent a fortnight ago.

After spiking in May, the consumer price index fell 1.43 percent on the month in June, for an annual rise of 6.24 percent.

Market year-end inflation expectations have risen steadily this year from 6.56 percent at the start of 2011.

The central bank itself forecasts year-end inflation at 6.9 percent, far in excess of its official target of 5.5 percent.

The main Istanbul share index was down 0.1 percent at 64,092.97 points, in line with gains in the emerging markets benchmark index.

Shares in Sanko Pazarlama, a unit of conglomerate Sanko Holding, jumped 16 percent to 5.52 lira after Japanese air conditioner maker Daikin Industries said it had reached a deal to buy Turkish air-conditioning company Airfel from Sanko Holding.