The Turkish lira fell more than 2% to a new record low against the dollar Tuesday, due to market fears that the central bank may raise interest rates this week less than previously expected.
The lira hit a record low of 26.9 against the US currency, retreating from Monday's close of 26.3505.
The lira weakened by 30% so far this year.
In June, the central bank raised its policy rate by 650 basis points, 15%, and promised to continue tightening until there is a significant improvement in inflation expectations.
The interest rate hike and hawkish tone were the strongest signals of a reversal after years of loose policy under President Recep Tayyip Erdogan, who prioritized growth and investments.
Turkey's annual inflation rose to a 24-year high of 85.51% last October, mainly due to the depreciation of the lira due to Erdogan's policy of low interest rates. It fell to 38.21% by June but is expected to rise again.
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