World Economy

Turkey's lira hits 5-week low as political protests intensify


Turkey's lira fell to its weakest level in five weeks against the dollar on Wednesday after protests broke out across the country, unnerving investors amid weakness in global markets.

(Read more: Global stocks slideas Crimea referendum looms)

Protesters clashed with police in a number of Turkish cities late on Tuesday after the death of a 15-year-old boy who was hit in the head by a tear-gas canister during anti-government demonstrations last summer.

The prospect of renewed protests in Turkey has unsettled investors in the run-up to local elections on March 30, while economic uncertainty in China and the United States and political tensions in Ukraine have also dampened the mood.

(Read more: Ukraine worries? This economy is at risk too)

An employee uses a machine to count a bundle of 100 Turkish lira banknotes inside a currency exchange office in Istanbul, Turkey.
Kerim Okten | Bloomberg | Getty Images

The lira slipped to as low as 2.2555 against the dollar, a level last seen after the central bank's dramatic interest rate hike in January. The lira weakened from 2.2281 late on Tuesday.

"Large protests erupted across Turkey last night, following the death of a 15-year-old boy who had got into a coma after having injured during the demonstrations last summer," said Finansbank economist Deniz Cicek.

"Consequently, rising political risks brought USD/TRY to above 2.24 over the night."

Tensions were already running high in Turkey after a string of leaked voice recordings purporting to reveal government corruption. Prime Minister Tayyip Erdogan says the recordings are "fabricated" and are aimed at unseating him.

Erdogan says the voice recordings are the work of ally-turned-foe Fethullah Gulen, a U.S.-based Muslim cleric, and his Hizmet (Service) network, who he accuses of forming a "parallel state" within Turkey.

(Read more: Erdogan says Turkey could ban Facebook and YouTube)

The 10-year benchmark bond yield rose to 11.10 percent from 10.98 percent late on Tuesday.

The main Istanbul share index was down 1.22 percent at 62,296.97 points, in line with the wider emerging markets index, down 1.15 percent.