The Turkish lira fell by more than 10 percent at one point on Monday after President Recep Tayyip Erdogan fired the head of the central bank, who had been pushing a policy of higher interest rates.
The move rattled investors, who sold on the lira on the view that the central bank might soon start cutting rates. The currency briefly fell to a level of around eight-and-a-half to the US dollar.
Erdogan has yet to explain why he fired the central bank governor. It was the third time in just two years.
But observers suspect he was not happy with the higher rates. He had said in the past that they cool the economy.
The central bank had raised rates multiple times under Governor Naci Agbal. The latest increase this month brought the key rate to 19 percent.