The Turkish currency plummeted against the US dollar on Monday after President Recep Tayyip Erdogan fired the central bank governor over the weekend for hiking interest rates.

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The lira was trading at around 7.8 against the dollar nearly 9 percent down from Friday's close. It had been weaker earlier Monday at 8.4 per dollar.

Erdogan, who advocates keeping interest rates low to tame inflation, unexpectedly fired Naci Agbal with a decree on Saturday just four months after he took office. He replaced Agbal with a banking professor who has argued for lower interest rates.

Agbal was brought in to lead the central bank after the Turkish lira hit record lows and inflation soared. In his months in office, Agbal had hiked the benchmark rate a total of 875 basis points, working to rebuild the credibility of the central bank after it was damaged by years of unorthodox policies.

Agbals most recent hike of 200 points on Thursday took the rate to 19 percent, which was higher than analysts expected. The bank said tight monetary policy would be maintained until inflation, which has hit 15.61 percent was brought under control.

Erdogans decree on Saturday appoints Sahap Kavcioglu as the new central bank head. Kavcioglu is a banking professor and a columnist in a pro-government newspaper where he has argued for low interest rates. He previously was a lawmaker in Erdogans ruling party.

Kavcioglu is the fourth governor to lead the bank in two years.

First Published:Mar 22, 2021 3:18 PM IST