Turkish lira firms after Erdogan calls for swift formation of government

ISTANBUL (Reuters) - The Turkish lira firmed against the dollar and bond yields fell on Thursday as President Tayyip Erdogan's call for the swift formation of a new government helped ease concerns of political turmoil after an inconclusive election.

Erdogan urged the political parties to work quickly to form a new government, saying egos should be left aside and that history would judge anyone who stood in the way.

In his first public appearance since the ruling AK Party was stripped of its majority in a parliamentary election on Sunday, Erdogan said his own role as Turkey's first elected president was critical and that he would play his part with the powers given to him by the constitution.

"Erdogan's comments are more moderate than we are used to, market positive. Although the risks are still there, markets are pricing in that the election process will be overcome with less damage than expected," said an Istanbul-based forex manager.

The lira , which has been hit hard by political uncertainty since the start of the year, firmed on what markets took as a more conciliatory tone after weeks of combative campaign rhetoric in the run-up to the election.

The lira was trading at 2.7110 against the dollar by 1500 GMT, gaining 0.9 percent in a day against the dollar.

Government bond yields fell, with the yield on the 10-year bond falling to 9.38 percent from 9.62 percent on Wednesday.

(Reporting by Nevzat Devranoglu; Writing by Ece Toksabay; Editing by Hugh Lawson)