Shares closed higher ahead of a week of public holidays.
Turkish markets will be closed from midday on Monday until Friday for a holiday to mark the end of Ramadan.
The lira closed at 1.7520 versus the dollar, firming from the previous close of 1.7615.
The currency found some support from better-than-expected trade data showing the deficit expanded to $9.01 billion in July, less than a Reuters poll forecast for $9.4 billion.
It was also supported by local investors selling dollars ahead of the holiday period, according to Tufan Comert, strategist at Garanti Securities.
But the lira may lose support again over the days ahead due to the central bank’s bias toward an easier policy. The Turkish central bank said on Friday it could cut rates and loosen reserve requirements if the slowdown in domestic economic activity became more pronounced.
“We think the dovish stance of the central bank will continue to put pressure on the currency in the coming weeks,” wrote BNP Paribas in a weekly research note.
In late trade on Friday the currency weakened again to 1.7560 in the wake of comments from Federal Reserve Chairman Ben Bernanke.
The benchmark May 15, 2013, yield rose to 7.97 percent on Friday from 7.93 percent on Thursday, after central bank minutes from Tuesday’s monthly meeting showed the bank expects core inflation indicators to increase temporarily.
“While Turkish bonds saw some profit-taking following the central bank’s policy rate decision, we continue to see bond yields as attractive, particularly in the short and medium term,” added analysts at BNP Paribas.
Still, the bank expects core inflation indicators to start falling again by the end of the year and the inflation outlook for the end of 2012 was seen consistent with the bank’s 5 percent target, the minutes of the meeting showed.
“After the (central) bank mentioned that core inflation could rise temporarily, the benchmark yield rose from 7.93 percent to 7.98 percent. CPI-linked bonds could benefit from this,” said a fund manager at a portfolio company.
Turkish shares rose 1.4 percent to 53,707.56 points, outperforming the MSCI emerging markets index, which was down 0.13 percent.
“The positive decoupling of Turkish shares is related to August contracts, which reached their maturity date in the Turkish Derivative Exchange,” said Ozgur Yurtdasseven, research manager at Garanti Investment.
