Turkey currency plummets against US dollar

The Turkish currency plummeted against the U.S. dollar on Monday after the country's President Recep Tayyip Erdogan fired the governor of the central bank over the weekend for hiking interest rates.

The lira was trading at around 7.9 against the dollar - down nearly 10% from Friday's close.

It had been weaker earlier on Monday, at 8.4 lira per dollar but recovered some of its losses after Finance Minister Lutfi Elvan assured markets that Turkey was committed to free market rules and to a liberal currency exchange regime.

Erdogan, who advocates keeping interest rates low to tame inflation, unexpectedly fired central bank governor Naci Agbal with a decree on Saturday, just four months after he took office.

In his months in office, Agbal had hiked the benchmark rate a total of 875 basis points, working to rebuild the credibility of the central bank after it was damaged by years of unorthodox policies.

Agbal's most recent hike of 200 points on Thursday took the rate to 19%, which was higher than analysts expected - the bank had said the tight monetary policy would be maintained until inflation, which had hit 15.61%, was brought under control.

Erdogan has replaced Agbal with Sahap Kavcioglu, a banking professor and columnist in a pro-government newspaper, who has in the past argued for low interest rates. He previously was a lawmaker in Erdogan's ruling party.

Kavcioglu is the fourth governor to lead the bank in two years.

In Istanbul on Monday, retirees lamented yet another change in the bank's management - 66-year-old Umut Erhan said the change was causing a lack of stability, which means the economy "just cannot recover".

But shop owner Volkan Akbulut had mixed feelings - saying that the change in lira value against the dollar was both "good and bad". He said that the dollar price increase means "more tourists buy (from us). Our business improves".