Bond yields declined in low volumes and shares were higher.

The lira strengthened to below 1.75 against the dollar in early trade but lost some ground to 1.7555 at 0944 GMT, compared with an interbank close of 1.7595 on Thursday.

Against its euro-dollar basket the lira traded at 2.0959, weakening from a previous close of 2.0750.

"Investors will monitor the Greece issue. The lira's level will continue to depend on external developments. If it breaks the 1.75 level, it could go towards 1.74, 1.7250, 1.71 levels during the holidays," said a forex trader of a bank in Istanbul.

"The lira could strengthen during the holiday period as households could sell dollars because of their lira needs and due to the inability of companies to buy dollars," he added.

Turkish markets will be closed from Monday to Wednesday next week to mark the Muslim Eid Al Adha feast of the sacrifice. Markets will reopen on Nov 10.

The yield on the benchmark July 17, 2013 tTR170713TVA=IS bond fell to 9.86 percent from a previous 9.91 percent. Bond trading volumes continued to be very low.

"Investors had to contend with conflicting newsflow relating to Greece throughout yesterday's session... Heading into the weekend, bond market activity may see some position-squaring ahead of next week's market holidays," wrote analysts at the Dubai-based Turkey desk of brokerage Tradition.

The Turkish Central Bank said on Friday it expected inflation to continue rising in the short term due to the base effect of unprocessed food prices and end the year close to levels anticipated in the bank's October inflation report.

In that report, the bank sharply revised up its end-2011 inflation forecast to a mid-point of 8.3 percent from 6.9 percent, citing excessive lira depreciation.

"If meaningful monetary tightening is not implemented Turkey may experience a real inflation problem. This suggests that there is room for front-end yields in particular to head higher," Tradition added.

The main Turkish share index was up 0.6 percent at 56,856 points, underperforming the emerging market index which was up 1.88 percent.

"The index is expected to... target the 50-day moving average roughly passing through 57,000 in early trade. Third quarter earnings so far have proved to be resilient" and the strong lira was also boosting equities, analysts from Ekspres Invest wrote in a note.

Banking shares rose 0.74 percent ahead of Akbank and Isbank's results due later on Friday.

Shares in Garanti Bank climbed 0.9 percent after it posted third quarter net profit down 8 percent, in line with forecasts. Yapi Kredi Bank rose 0.3 percent after it announced a 31 percent fall in net profit.

Refiner Tupras climbed 3 percent after it said net profit rose 1.6 percent to 355 million lira, sharply exceeding a poll forecast of 270 million lira.