ISTANBUL (Reuters) – Turkey’s lira rose to its strongest level for eight months yesterday, gaining 0.6 percent against the dollar, helped by comments from the central bank that it was ready to hike rates if markets turned volatile. The lira, which also strengthened against the euro, closed on the interbank market at 1.4065 to the dollar, compared with Friday’s 1.4155. Earlier yesterday the central bank said in a published letter to the government it could tighten policy if it saw volatility in financial markets. The lira was trading at 1.4120 before the central bank’s statement. «It’s obviously quite a hawkish statement. .. to my mind that’s one of the main reasons behind the rise,» Sarah Hewin, an economist at American Express in London, said. «We could see it go through 1.40,» she said, adding she was expecting the lira to weaken to 1.50 over the next three months, coming under pressure from the election of a president by parliament in May and general elections in November. The bank also said uncertainty over public spending was a risk to inflation and overall demand, adding to comments it has made in the past that it would keep an eye on government spending. The May presidential election and the polls in November are expected to bring volatility to Turkey’s financial markets, which tend to be sensitive to politics. Istanbul’s main stock index rose 2.6 percent, with foreign funds flowing into Turkey, on positive global sentiment. «Foreign money continues to come into the markets. Globally, sentiment is good. .. at the moment foreign markets are having more effect than domestic factors,» said Selcuk Cekinmez, from Ekinciler Investment’s fund management arm.