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Turkish stocks, bonds fall in pre-Fed decision jitters

ISTANBUL, Oct 30 (Reuters) - Turkey's main stock index eased off 5 week peaks and bond yields rose on Wednesday as investors feared any hint of future tapering from the U.S. Fed, while expecting no cuts in bond buying this month.

The main Istanbul share index closed down 0.76 percent at 79,565.18 points, having reached its highest level in almost 6 weeks earlier in the session. It underperformed the broader emerging markets index, which rose 0.57 percent.

The 10-year benchmark bond yield rose to 8.65 from 8.60 percent at Tuesday's early close.

The Fed's policy arm, the Federal Open Market Committee, concludes a two-day policy meeting on Wednesday at 1800 GMT and is widely expected to maintain its $85 billion bond buying programme into next year, preferring to see out the impact of October's budget impasse and government shutdown before reducing the stimulus.

Analysts, however, warned that any hint that the Fed could trim back stimulus in the near future would prompt a negative reaction, and noted that the recent rally had stretched valuations to a point that could encourage some profit-taking.

This has given support to emerging markets which benefited from an influx of cheap money from the stimulus. Turkey is particularly vulnerable to a reduction in the asset purchases because of its large current account deficit.

Halkbank, real estate firm Emlak GYO and Ford Otosan, a car manufacturer co-owned by Ford Motor Company and Koc Holding, were due to release their third-quarter results after market close.

The lira rose to 1.9875 against the dollar compared with 1.9920 late on Tuesday as the interbank rate rose indicating that liquidity demand outstripped supply.

Analysts looked ahead to Thursday and the release of the central bank's quarterly inflation report and September's foreign trade data which could show a further deterioration of the trade balance. (Reporting by Dasha Afanasieva; editing by Ron Askew)