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Turkish assets up as trade data raises hopes for credit rating

Thursday, 11 Oct 2012 | 11:48 AM ET

ISTANBUL, Oct 11 (Reuters) - Turkish shares jumped to their highest level since May 2011 and the lira firmed on Thursday after data showing a lower-than-expected current account deficit.

The data strengthened hopes that credit rating agencies could upgrade soon upgrade Turkey's rating.

Turkey's August current account deficit fell to $1.18 billion, its lowest level since October 2009, central bank data showed, and was smaller than a Reuters poll forecast for a deficit of $1.750 billion.

Late in August, Fitch said it might raise Turkey's long-term rating to investment grade if it makes progress towards its potential growth rate, trims inflation to its target rate and narrows the current account gap to a more sustainable level.

Currently, Fitch rates Turkey's creditworthiness at BB+ with a stable outlook, one notch below investment grade. The agency said on Wednesday it will be looking at Turkey's credit rating quite soon.

By 1453 GMT the lira had firmed to 1.8092 against the dollar , from 1.8165 late on Wednesday.

Turkey's main share index closed up 1.64 percent at 69,577 points, its highest level since May 2011, outperforming a 0.45 percent rise in the emerging markets index .

The rally was led by banking shares which closed 2.96 percent up on Thursday.

Analysts said bank shares were also gaining on the expectation that the central bank will loosen its policy stance as the trade data indicated a slowdown in the economy. An easier monetary policy would lower the banks' borrowing costs.

The yield on Turkey's two-year benchmark bond

closed at 7.59 percent from a Wednesday's close at 7.63 percent.

Turkey's central bank cut the upper end of the interest rate corridor by 150 basis points to 10 percent for the first time in seven months in September.

(Writing by Seltem Iyigun; Editing by Elaine Hardcastle)

((seltem.iyigun@thomsonreuters.com)(+90 212 350 70 62)(Reuters Messaging: seltem.iyigun.thomsonreuters.com@reuters.net))

Keywords: MARKETS TURKEY/CLOSE