(Bloomberg) -- The Turkish lira fell after a court convicted a U.S. pastor and then ruled to free him after a two-year-long detention.

The lira was expected to gain on the release of Andrew Brunson, yet investors held fire after a five-day rally. The pastor was sentenced to more than three years in jail but freed on time served, over his alleged involvement in a 2016 coup attempt.

“I was expecting the lira to appreciate a bit and then dollar-lira to hit a rock bottom in the coming days,” said Cristian Maggio, the head of emerging market research at TD Securities in London. “While things can still develop in that direction, the absence of a knee-jerk reaction suggests that dollar-lira had already all the good news in the price.”

An unprecedented diplomatic breakdown between the NATO allies over the case compounded an almost 40 percent depreciation in the currency this year. A rapprochement could go a long way toward restoring battered investor confidence and stemming an outflow of foreign capital as the Turkish economy slides toward a recession.

The lira slipped 0.8 percent to 5.9710 per dollar, after gaining as much as 1.6 percent earlier. The currency’s deprecation this year gave way to the fastest inflation in 15 years, piled pressure on companies reeling under a heavy foreign-currency debt load, and forced the central bank into nearly doubling its benchmark rate to contain the rout.

To contact the reporter on this story: Constantine Courcoulas in Istanbul at ccourcoulas1@bloomberg.net

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee

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