Turkey's embattled lira tumbled almost 5% in value on Thursday as the resignation of the deputy central bank governor intensified market concerns over the direction of monetary policy.
The lira has lost nearly 45% of its value since the start of the year against the dollar as investors took fright over a bitter row with the United States and anxiety over the direction of policy under President Recep Tayyip Erdogan.
The lira was trading at 6.73 to the dollar, a loss of value of 4.5% on the day, with Turkish markets closed due to a holiday.
A particular concern has been the independence of the central bank which has not moved its headline interest rate higher despite the nose-diving currency and inflation that has surged to almost 16%.
Economists fear that Erdogan is pressuring the nominally independent institution not to raise rates in order to maintain growth, after he described interest rates as the "mother and father of all evil".
State-run news channel TRT Haber said that deputy central bank deputy governor Erkan Kilimci was stepping down from the job he has held for the last two years to a new post at the Development Bank of Turkey.
This should open the way for Erdogan to choose a figure of his own choosing as new deputy governor. Kilimci was one of four deputies to governor Murat Cetinkaya who sit on the monetary policy committee that sets interest rates.
"With this development (the resignation of Kilimci) fuelling concerns over Turkey's fragile financial system, the lira could be set to extend losses," Lukman Otunuga, Research Analyst at FXTM, told AFP.
"Lira weakness may remain a dominant theme amid ongoing fears of double digit inflation, the deepening of current account deficit and questions over the central bank independence," he added.
Turkey has been slapped with sanctions on two ministers and also with doubled tariffs on aluminium and steel by the United States over its holding for the last two years of US pastor Andrew Brunson.
Economists fear further measures from the United States would cause more bleeding for the lira while the domestic outlook remains uncertain.
Turkey will on Monday release inflation data for August -- which will be scrutinised for any further jump. September 10 sees growth data for the second quarter, with some economists fearing Turkey risks going into recession in 2019 due to the tighter monetary conditions.
"The latest Turkish activity data suggest that the plunge in the lira since May, and the associated sharp tightening of financial conditions, has tipped the economy into recession. Things are only likely to get worse," Capital Economics said in a note.
A crucial watershed is expected to be the next meeting of the central bank on September 13, with markets hollering for a hike to support the lira and the currency likely to be punished in case of no action.