Turkey's lira surged to its biggest gain in two years Monday after President Recep Tayyip Erdogan's powerful son-in-law quit as finance minister following the abrupt appointment of a new central bank chief.
Economists read the twin departures of Berat Albayrak -- the husband of Erdogan's elder daughter Esra -- and the central bank's Murat Uysal over the weekend as a signal that Turkey was admitting past policy errors and preparing to raise interest rates.
The Turkish currency has shed nearly a third of its value against the dollar this year and became the world's worst performer last month.
It ended the day Monday at close to eight to the dollar after opening the day around the 8.40 mark. Bloomberg said the five-percent gain was biggest in two years.
Economists estimate that Turkey has burned through more than $100 billion in a wasted effort to prop up the lira since the start of last year.
The failed defence was maintained while the central bank kept following Erdogan's wishes not to raise the main interest rate.
"In my 30 years covering emerging markets, I cannot quite remember such a disastrous policy move in any of the countries I have covered," Bluebay Asset Management economist Timothy Ash said.
Higher interest rates make currencies more attractive by increasing the return on local investments and a hike would thus bolster lira.
But Erdogan believes they cause inflation and ousted a previous central bank chief who was raising them in 2018.
Capital Economics said the two departures "could be a hint of a shift back towards more orthodox policymaking at the central bank".
- 'All policy tools' -
Albayrak resigned in a Sunday night statement on Instagram that caught some top Turkish officials by surprise.
"After serving in ministerial posts for nearly five years, I took the decision not to continue my duty (as finance minister) due to health issues," the 42-year-old wrote.
Erdogan formally accepted Albayrak's resignation in a statement issued by the president's office well after the Turkish market closed on Monday night.
"Our esteemed minister's accomplishments were appreciated by the president," the presidency said in an English-language statement.
"Upon the president's review, Treasury and Finance Minister Berat Albayrak's request to be excused from his duties has been accepted."
Analysts and Turkish media speculated that Albayrak's resignation was prompted by his opposition to former finance minister Naci Agbal's appointment Saturday as the new head of the central bank.
Agbal subscribes to mainstream economic theory on interest rates.
The central bank "will decisively use all policy tools in pursuit of its price stability objective," Agbal said in a statement Monday.
He added that the bank's current approach would be reviewed ahead of the next monetary policy committee meeting on November 19.
- 'Are you paid in dollars?' -
Albayrak's term as finance minister coincided with a currency crisis in 2018 that was followed by the lira's plunge to historic lows against both the dollar and the euro this year.
He drew the public's ire in August by downplaying the lira's slide.
"Are you paid in dollars?" he asked in a live television interview.
"Do you have any business in dollars?" he demanded in comments that went viral on social media at the time.
The 42-year-old has frequently accompanied Erdogan on foreign trips and participated in policy meetings with world leaders.
The central bank raised its benchmark rate for the first time in two years in September -- from 8.25 to 10.25.
But the lira fell to new lows after the bank surprised investors by holding the main rate steady last month.