Turkey's struggling currency hit a new all-time low against the dollar on Tuesday after Erdem Basci, the central bank's president, said he had no concerns over current exchange rates.
The Turkish lira, which has fallen over 13 percent against the dollar since the start of the year - fell sharply to a new record low of 2.021 after Basci's comments from 1.9918 late on Monday.
The bank's president, speaking to the Turkey's Anadolu news agency, said that he would not use interest rates to defend the lira and said that investors should not be surprised if the U.S. dollar falls back to 1.92 against the Turkish lira by the end of the year. He added that additional tightening measures could be implemented next Monday, signaling that the bank could use currency intervention instead of an interest rate rise.
"The recent rise in currency rates is temporary," he told the news agency on Tuesday. "We have no worries about exchange rates."
Stocks in Turkey also fell with the Borsa Istanbul National 100 Index sinking 2.46 percent on Tuesday morning.
Timothy Ash, head of emerging markets research at Standard Bank, described the central bank's approach as "strange" and added that Basci was "tearing up the central banking rule book" with his unorthodox policy.
"He seems to be taking away one of his few bullets in the gun by not allowing himself the option of not using interest rates," he told CNBC, adding that the situation had become "high risk". The large current account deficit for Turkey and external financing requirements meant the lira would continue to be biased towards weakness, he said.