The lira, which has lost nearly as much as 20 percent of its value to the dollar this year, rallied to 1.8335 against the greenback from 1.8665 a day earlier bringing gains since Tuesday’s record 1.9 record low to 3.3 percent.

Against a euro/dollar basket, the lira recovered to 2.1438, compared with 2.1821 on Wednesday, and an all-time low of 2.2189 hit on Tuesday. The benchmark bond yield fell to 8.45 percent from 8.51 percent.

On Wednesday, the central bank announced a similar maximum auction amount and actually sold an unprecedented $750 million, saying it would continue with high-volume sales when needed.

It also cut reserve requirements on forex deposits in a move boosting liquidity by $1.3 billion and doubled the amount of lira reserves banks can hold in dollars.

In a regular monthly presentation to bank economists on Thursday, Governor Basci declined to comment on Wednesday’s measures but bankers reported him as saying: “Do actions speak louder than words? We think yes.”

Last week, Basci warned any further depreciation in the lira would be unwelcome.

But, the lira has come under pressure along with other emerging market currencies because of growing concerns over Greece and the potential for the euro-zone debt crisis to tip the global economy into recession.

“The central bank governor said they will take more actions from now on instead of talking. The governor signalled the bank has enough reserves in order to do so,” said Oyak Securities economist Gulay Elif Girgin.

“We also saw signs of a future cut in lira RRRs (required reserve ratios) as well as other measures concerning the banking sector to encourage long term borrowing,” she said.

The bank said in its presentation headline inflation will rise in the final quarter due to hikes in state-administered prices for goods and services, and unfavorable base effects.

Core inflation was seen reaching around 8 percent before resuming a declining trend in early-2012, the bank said, adding that recent data suggest there will be a notable slowdown in economic growth in the second half.

“The deceleration in credit growth and domestic demand combined with the exchange rate movements have been contributing to the rebalancing of domestic and external demand,” the bank said. 

It said it may differentiate required reserve ratios of non-deposit lira liabilities according to maturities in order to enable banks take advantage of favorable conditions in funding costs caused by the upgrade in Turkey’s local currency credit rating.

“It is clear that the level of central bank forex reserves is quite strong according to the ratio of official reserves to short term FX debt,” the text of the presentation said.

The central bank’s gross foreign exchange reserves fell to $85 billion as of Oct 4, compared with $91.97 billion on Aug. 5, when daily forex sales auctions began.

It also said the share of non-residents in government domestic debt instruments had decreased in recent months due to increasing selling pressures.

The bank said credit growth, whose high levels have been a source of market concern, had declined below seasonal averages and was seen at 25 percent due to the elimination of the base effect in the fourth quarter.