The Turkish lira was 2.1% weaker against the dollar on Monday after President Tayyip Erdogan dismissed the central bank governor, laying bare differences between them over the timing of interest rate cuts to revive the recession-hit economy.
At 0427 GMT, the lira stood at 5.7525 against the U.S. currency, having weakened as far as 5.8245 in early Asian trade.
Governor Murat Cetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy Murat Uysal, a presidential decree published early on Saturday in the official gazette showed.
Uysal, who served as deputy governor for three years before the shock dismissal of his boss, is known as one of the more dovish members of the bank's interest rate setters.
No official reason was given for the sacking, but government sources cited Erdogan's frustration that the bank has kept its benchmark interest rate at 24% since last September to support the ailing lira currency.
Hurriyet newspaper on Sunday quoted Erdogan as telling a meeting with his party's lawmakers that he dismissed Cetinkaya for refusing the government's repeated rate cut demands.
Analysts say the central bank could start easing monetary policy at a July 25 meeting.
The governor's dismissal comes just days before Turkey is expected to take delivery of Russian air defence systems, triggering likely U.S. sanctions which could put the lira under renewed pressure.