Turkey's currency rallied Wednesday after the central bank aggressively raised its key interest rates in a bid to stop a tumble in lira to a record low.
The bank, in an overnight crisis meeting, hiked its overnight lending rate to 12 percent from 7.75 percent, the overnight borrowing rate from 3.5 percent to 8 percent, and one-week repo rate to 10 percent from 4.5 percent.
The lira was at 2.1935 to the dollar and 3.0010 to the euro early Wednesday, falling back slightly from a stronger position at the opening of trading.
That was down from the 2.25 to the dollar and 3.09 to the euro quoted just before the central bank held a midnight crisis meeting to decide the rate jump.
But it was still well above the record low of 2.39 to the dollar it was languishing at on Monday.
Currencies in emerging markets across the world are generally taking a beating, in part because of the US Federal Reserve's decision to taper off its monetary stimulus package.
But Turkey's problems were exacerbated by a political crisis sparked by a wide graft probe that has taken down several allies of Prime Minister Recep Tayyip Erdogan's government.
Erdogan, who had made a turnaround in Turkey's economic fortunes a keystone of his 11-year rule, had opposed the central bank's rate rise.
He said the bank would be responsible for any ensuing slowdown in growth. But he acknowledged the bank was an independent institution.
Erdogan's government had wanted rates held down to sustain growth ahead of an election cycle beginning with March local polls.
His finance minister, Mehmet Simsek, on Wednesday declined to comment on the central bank's decision, because he said the bank's credibility was "critical".
"If they made such a decision, I am sure it is the best one," he told the private NTV television.
"The central bank is doing well in a climate of global problems," he said, adding that "the central bank decision has eliminated investors' concerns to a significant extent".
Simsek also said the Turkish economy was vulnerable to the global turbulance.
"We are an open economy and integrated into the world economy," he said.
Simsek predicted "modest growth in the short run," but said: "If we make right decisions in the glboal economic order, we can limit the risks over growth."
The central bank had said before its decision it was ready to tighten monetary policy in a "lasting way".
Analysts said the central bank's governor Erdem Basci defied the government with the bold action it had taken, but reckoned the move helped the bank gain credibility lost after months of inaction.