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Turkish lira surges after bold central bank action

Turkey's Central Bank Governor Erdem Basci speaks during a press conference in Ankara, Turkey, Tuesday, Jan. 28, 2014. The bank is signaling that it is preparing to reverse course and raise interest rates to address higher inflation and a dropping currency. The bank was holding an extraordinary meeting Tuesday and was expected to announce higher rates in a statement overnight.(AP Photo)

ANKARA, Turkey (AP) -- The surprisingly big interest rate rise by Turkey's central bank has paid dividends, at least in the short-term, as the country's currency surged on foreign exchange markets.

In morning trading Wednesday, the Turkish lira was up 1.8 percent against the dollar at 2.2116 Turkish lira. Meanwhile, the main stock exchange was up 0.6 percent at 63,899.

The moves come in the wake of the decision overnight by the central bank to increase its main overnight lending rate to 12 percent from 7.75 percent.

The increase was far more than expected and followed a sustained drop in the Turkish lira, which has been battered by concerns over a global growth slowdown and the potential impact of the withdrawal of the U.S. Federal Reserve.