ISTANBUL - A Turkish court on Wednesday ruled to place an American pastor under house arrest after he spent almost two years imprisoned on terror-related charges, state media said, in a case that has raised tensions with the United States.

Andrew Brunson, who ran a protestant church in the Aegean city of Izmir, was first detained in October 2016.

The state-run Anadolu news agency said he was being put under house arrest, although it was not clear if he had already left prison.

Reports said that the ruling was issued by a criminal court in the Izmir region where he was being held. He has also been banned from leaving the country.

Brunson’s detention has become a symbol of the problematic relationship between NATO allies Turkey and the US, and news of his release into house arrest boosted the Turkish lira, which gained almost one percent in value against the dollar.

Brunson faces up to 35 years in jail if convicted on charges of carrying out activities on behalf of two groups Turkey deems terror organisations - one led by the US-based Muslim preacher Fethullah Gulen who Ankara says was behind the 2016 failed coup, the other the Kurdistan Workers’ Party (PKK).

The pastor denies the charges and his defence team argues the case is built on questionable witness statements that should never have been brought to court.

Brunson is one of tens of thousands of people detained on similar charges during the state of emergency declared by President Recep Tayyip Erdogan in the wake of the 2016 failed coup bid. The measure ended on July 18.

On July 18, a court had ordered Brunson to remain in prison, defying growing pressure from the US authorities for his release.

It was the third time his release has been refused - the court had in two previous hearings on April 16 and May 7 denied requests by the defence for Brunson to be set free.

US President Donald Trump had described the latest ruling to keep him in jail a “disgrace”, calling on his Erdogan to help free him.

Turkish-US relations are already strained over Washington’s refusal to extradite Gulen as well as American backing for a Kurdish militia in Syria which Turkey says is linked to the PKK.

Two Turkish employees from American missions in Turkey are also behind bars - a US Istanbul consulate staffer charged with espionage and an employee at the US consulate in Adana charged with supporting the PKK.

Last September, Erdogan suggested that Turkey could free Brunson if Washington handed over Gulen, who lives in self-imposed exile in Pennsylvania - an offer brushed off by Washington.