UPDATE 1-Turkish central bank to start gold, FX swap auctions for lira sterilisation

(Updates to add quote, background and banker comment on decision) ANKARA, July 23 (Reuters) - Turkey's central bank is to start swap auctions selling foreign currency and gold against Turkish lira with local banks, according to a document sent to banks on Tuesday. The central bank said it was launching the swap auctions to implement lira sterilisation - the bank's term for regulating excess liquidity. Earlier on Tuesday the central bank said liquidity conditions were being closely monitored and added that sterilisation would be implemented whenever needed, after it held the policy rate steady at 50%. The volume of the Turkish central bank's swap transactions with local banks, which hit a high of $64.5 billion before the presidential elections last year, fell to some $140 million this week. "Within the framework of the monetary policy, it has been decided to start sell-side Turkish lira swap auctions in order to diversify the sterilisation tools," the document seen by Reuters said. Launching sell side FX and gold swap auctions will cause a change in reserve calculations and have a significant impact on lira liquidity in the market, according to bankers. As of July 22, lira liquidity excess in the banking system, which occurred mainly due to central bank's efforts to increase lira share in the system, stood at 200 billion lira ($6.09 billion). ($1 = 32.8350 liras) (Reporting by Nevzat Devranoglu; Editing by Jonathan Spicer and Alison Williams) (([email protected]; +90-212-350 7051; Reuters Messaging: [email protected];))