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Turkish lira firms 1% against dollar after Turkey-U.S. deal on Syria

Credit: REUTERS/MURAD SEZER

Turkey's lira firmed some 1% against the dollar on Friday, as the prospect of severe sanctions from the United States waned after Ankara agreed to a ceasefire in northern Syria.

Updates prices, adds analyst quote, background

ISTANBUL, Oct 18 (Reuters) - Turkey's lira firmed some 1% against the dollar on Friday, as the prospect of severe sanctions from the United States waned after Ankara agreed to a ceasefire in northern Syria.

The currency had been under pressure due to a deterioration of ties between Ankara and Washington over Turkey's operation against the Kurdish YPG militia, which was a main U.S. ally in the fight against Islamic State.

In meetings between the allies on Thursday, Ankara agreed to a ceasefire for five days while the YPG withdraws from Syrian border regions. Vice President Mike Pence said sanctions would be removed after the deal is implemented and no further sanctions would be pursued.

The lira TRYTOM=D3 stood at 5.7725 against the dollar at 0739 GMT, firming nearly than 1% from Thursday's close of 5.8250. It firmed to 5.7580 earlier.

It had weakened to 5.9395 this week on expectations of the sanctions, which turned out to be softer than expected.

Jason Tuvey, senior emerging markets economist at Capital Economics, said the prospect of further sanctions are off the table for the moment but added that things could still go wrong with implementation of the ceasefire.

"After the five days, there could be an escalation of conflict in northern Syria," he said, adding that this could lead to another strain with Washington and bring sanctions back on the table.

U.S. prosecutors this week charged Turkey's Halkbank HALKB.IS with evading sanctions on Iran, a move which Turkey said was also related to its operation in Syria. Pence said he told Turkish officials that the case was a matter for the New York court that charged the bank.

The bank's shares, which had plummeted following the news earlier this week, surged at Friday's opening, rising some 7.16%. They were up 6.03% at 0742 GMT.

The main BIST100 share index .XU100 was up 3.49%, while the banking index .XBANK was up 5.15%.

Despite the ceasefire agreement, Republican Senator Lindsey Graham and Democratic Senator Chris Van Hollen will move "full steam ahead" with their plans to impose stiff sanctions on Turkey.

House Speaker Nancy Pelosi said the House of Representatives would vote on a bipartisan sanctions package against Turkey next week.

Trump may try to veto or delay those implementation of those sanctions, despite strong bipartisan support, Tuvey said. "He seems to be taking a fairly soft line on sanctions against Turkey," he said.

(Reporting by Ali Kucukgocmen and Can Sezer; Editing by Daren Butler)

((daren.butler@tr.com; +90-212-350 7053; Reuters Messaging: daren.butler.thomsonreuters.com@reuters.net))

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