The lira gained for a third day, set for its highest level this month, and bonds rose as calm returned to Istanbul’s Taksim Square after two weeks of clashes between anti-government demonstrators and riot police.
The worst month in a year for emerging-market currencies will prove to be more than a momentary bout of weakness to strategists at firms from UBS AG to Societe Generale SA who see the Federal Reserve weaning investors off its extraordinary stimulus.
The Turkish lira, which trailed emerging market currencies from the Brazilian real to the Russian ruble last year, is attracting bullish recommendations after first-quarter economic growth approached that of China.
The cost of insuring Turkish debt against currency losses is rising as global banks including Goldman Sachs Group Inc., HSBC Holdings Plc and Credit Agricole SA predict policy makers will act to reverse lira gains.
The lira headed for the highest in more than three weeks after the Bank of Japan unexpectedly expanded its asset-purchase program and the Turkish central bank cut overnight lending rates by less than forecast.