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Even as the selling pressured abated, investors kept a nervous eye on Ankara after Monday's bloodletting which saw the lira hit record lows and equity markets go into freefall on concerns Turkey's financial crisis could spread globally.
"The Turkish lira has finally found some support after two days of intense selling that triggered panic across the markets," said Fawad Razaqzada, market analyst at Forex.com, adding that the lira had clawed back most of the previous day's losses.
'A LONG WAY TO GO'
"But it has a long way to go following its 13 per cent or so drop on Friday and its previous declines," he said.
In European deals, the Turkish unit advanced to 6.47 to the dollar and 7.39 to the euro, which was well off the all-time record lows seen the previous day, after Turkey's central bank vowed to boost liquidity.
In Europe, London and Paris equities were down at the close, while Frankfurt was flat.
In New York, however, the Dow, S&P 500 and the Nasdaq all posted gains of around half a per cent, with analysts reporting that investors were less worried about Turkey's crisis affecting other emerging economies.
The improving exchange rate of the Turkish currency helped ease fears for other emerging currencies which have become entangled with the lira's woes.
But the Indian rupee still fell to a record low of 70 to the dollar on Tuesday.
"Turkey's central bank managed to calm down the currency markets for the time being by committing to provide liquidity for the embattled Turkish lira," said Fiona Cincotta, senior market analyst at traders City Index.
"The lira even managed to claw back some lost ground ... allowing stock and commodity markets to recover."
RATE HIKE NEEDED
But concerns remain about how the crisis will pan out, with Turkish President Recep Tayyip Erdogan in combative mood, accusing Washington of plotting against his country, and calling for a boycott of US electronic goods.
"A sizable rate increase by the Central Bank of the Republic of Turkey (CBRT) followed by drastic measures to reduce the fiscal deficit still appears to be the most viable option to re-anchor the lira and pull the country's economy from the brink," said Dean Popplewell, a market analyst at OANDA.
On the Milan stock exchange, shares in motorway operator Atlantia were sharply lower after a bridge collapsed on the A10 Italian motorway which the company runs.
They were down by around 5.5 per cent in late trading, having earlier been suspended temporarily when their drop exceeded the permitted 10 per cent threshold.
In Asia, Shanghai and Hong Kong equities sank into the red on downbeat Chinese data, which also weighed on commodities.
Key figures around 1540 GMT:
Dollar/Turkish lira: DOWN at 6.47 lira from 6.88 lira late Monday
Euro/Turkish lira: DOWN at 7.39 lira from 7.87 lira
Euro/dollar: DOWN at US$1.1370 from US$1.1410
Pound/dollar: DOWN at US$1.2757 from US$1.2771
Dollar/yen: UP at 110.84 yen from 110.70 yen
London - FTSE 100: DOWN 0.4 per cent at 7,611.64 points (close)
Frankfurt - DAX 30: FLAT at 12,358.87 (close)
Paris - CAC 40: DOWN 0.2 per cent at 5,403.41 (close)
EURO STOXX 50: FLAT at 3,409.44
New York - Dow Jones: UP 0.4 per cent at 25,296.25
Tokyo - Nikkei 225: UP 2.3 per cent at 22,356.08 (close)
Hong Kong - Hang Seng: DOWN 0.7 per cent at 27,752.93 (close)
Shanghai - Composite: DOWN 0.2 per cent at 2,780.96 (close)
Oil - Brent Crude: UP 86 cents at US$73.47 per barrel
Oil - West Texas Intermediate: UP 79 cents at US$67.99 per barrel