ISTANBUL, Feb 14 (Reuters) - Turkish shares hit their lowest this year on Thursday, weighed down by banking stocks after investors pocketed profits following strong earnings and attention turned to next week's interest rate decision and a competition board inquiry.

By 1528 GMT, the lira was at 1.7695 to the dollar , from 1.7660 late on Wednesday. Against its euro-dollar basket it firmed to 2.0651 from 2.0687.

The yield on the two-year benchmark bond closed at 5.77 percent from 5.82 percent on Wednesday.

Istanbul's main share index closed down 0.47 percent at 77,580.50 points, after earlier hitting its lowest level since Dec. 21, underperforming a flat global emerging markets index. Banks fell 1.16 percent.

Turkey's Competition Board will hear defence from a dozen banks under investigation for alleged collusion in setting loan rates on Feb. 25. The verdict is expected in the following 15 days.

There was also uncertainty ahead of the next central bank interest rate decision due on Feb. 19.

Expectations of a rate cut initially rose last week following weak industrial production figures and a rise in the lira's real effective exchange rate, but the currency has since weakened, raising the likelihood rates may stay on hold and that reserve requirements may rise, analysts said.

(Writing by Seltem Iyigun; Editing by Nick Tattersall) Keywords: MARKETS TURKEY/CLOSE

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

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