* Worries about assets becoming overvalued
* U.S. monetary stimulus eyed
(Updates with closing prices)
ANKARA, Oct 19 (Reuters) - Turkey's markets eased slightly on Tuesday on concerns that the rally in asset prices driven by monetary loosening in the United States might have reached excessive levels.
High growth and continued political stability at home have brought Turkish asset prices towards record highs, but the main driver has been the expectation of more cheap money flowing into higher-yielding emerging markets.
The lira ended weaker at 1.4240 against the dollar versus the previous day's 1.4190 on the interbank market. The currency hit 1.3920 against the dollar last week, its strongest in two years.
"The market is reacting on the assumption that the rally has somewhat overshot," said Yagiz Oral, a dealer in Denizbank.
The sales gained pace after the Chinese central bank raised its benchmark interest rates by 25 basis points in an unexpected move, propping up the dollar against other major currencies.
Turkish stocks hit successive historic highs this month and bond yields approached their historic lows.
Analysts said expectations that the U.S. Federal Reserve would further ease monetary policy next month moved the Turkish markets, but there is uncertainty over the amount.
"Some market players have questions in their minds on the amount of the easing but this is of secondary importance ... The FOMC members won't hesitate to use their power to produce monetary stimulus," said AK Portfoy fixed-income portfolio manager Eralp Denktas.
The main Istanbul share index fell 0.88 percent to 69,838.75 points, ceding some gains after a rally of some 4.3 percent last week, when the index rose to record highs on three consecutive days and broke 70,000 points.
The yield on the benchmark April 25, 2012 bond was 7.68 percent, down from the previous day's 7.72 percent. The benchmark bond touched an all-time low in October 2009 at 7.59 percent. (Reporting by Selcuk Gokoluk; Editing by Ruth Pitchford)