By Dasha Afanasieva
ISTANBUL, Nov 5 (Reuters) - The Turkish lira weakened on Tuesday on inflation concerns, with investors betting that higher-than-expected prices would still not be enough to spur the central bank to raise interest rates.
Markets looked to the release of Turkey's real effective exchange rate at 1230 GMT for more clues on monetary policy, after data on Monday showed sharp rises in the cost of food and clothing drove consumer prices up 1.8 percent in October. That was well above a Reuters poll forecast of 1.3 percent.
The lira weakened to 2.0242 against the dollar by 0904 GMT from 2.0150 late on Monday.
The currency came under pressure immediately after Monday's release but was supported by the central bank not holding its regular one-week repo auction and selling $120 million at auction. On Tuesday, conditions went back to normal and there was no such support.
'Overall, the data suggests that inflation could keep accelerating over the coming quarter, despite the central bank projecting its outlook of headline moderation (it acknowledges that core-inflation will accelerate),' a note from Societe Generale said.
For months, a depreciating lira has put pressure on Turkey's central bank to raise interest rates, which it has so far refused to do.
Delays in the scaling back of the U.S. Federal Reserve's stimulus programme, which would dry up cheap capital in emerging markets, bought Turkish policy makers more time.
But with a cut in bond-buying still on the horizon, there is concern that the central bank's complex mix of withholding regular repo auctions and dollar sales will not be enough to support the lira.
The 10-year benchmark bond yield rose slightly to 8.9 percent from 8.87 percent late on Monday.
The main Istanbul share index recovered some of the sharp losses made late in the session on Monday. It was up 0.52 percent at 76,630.94 points, outperforming the broader emerging markets index, which fell 0.33 percent.
(Editing by Catherine Evans) Keywords: MARKETS TURKEY/
(Dasha.Afanasieva@thomsonreuters.com)(+90 212 350 7051)(Reuters Messaging: Dasha.Afanasieva.firstname.lastname@example.org)
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