UPDATE 1-Turkish Aug current account gap shrinks to 34-month low

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ISTANBUL, Oct 11 (Reuters) - Turkey's August current account deficit fell to its lowest level since October 2009, central bank data showed, as the trade deficit fell due to an economic slowdown and in line with the central bank's targets.

Thursday's data showed the current account deficit fell to $1.18 billion from a revised $4.097 billion a month earlier, below a Reuters poll forecast for a deficit of $1.750 billion.

In the first eight months of the year the deficit, regarded as a major weak point of the Turkish economy, was $36.08 billion, 33 percent lower than in the same period of 2011.

The trade deficit, a key driver of the current account deficit, dipped 26 percent to $45.2 billion in the first eight month of 2012, compared with a year ago.

"(The data) helps affirm the rebalancing view - easing the concern over the wide current account deficit, large external financing requirement and lira. It also plays into the hands of those arguing for a rating upgrade," wrote Timothy Ash, head of emerging markets research at Standard Bank.

In order to narrow the current account deficit, which reached 10 percent of output in 2010, and reduce inflation, Turkey's central bank has employed since late 2010 a policy mix based on daily liquidity injections, an adjustable interest rate corridor and a low policy rate. The interest rate corridor is the gap between its overnight lending and borrowing rates.

The current account deficit excluding energy imports payment fell to $190 million in August, Turkish Finance Minister Mehmet Simsek told Reuters on Thursday.

Energy payments are the main driver of Turkey's large external gap as the country imports almost 95 percent of its energy needs.

Late in August, credit ratings agency Fitch said it may 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 rating agency said on Wednesday it will be looking at it credit rating quite soon.

(Writing by Seltem Iyigun; Editing by Catherine Evans)

((seltem.iyigun@thomsonreuters.com)(+90 212 350 7062)(Reuters Messaging: seltem.iyigun@thomsonreuters.com))