ISTANBUL, (Reuters) – The Turkish lira fell 1.6% against the dollar early in Asia trade. This was after President Tayyip Erdogan declared that he has ordered the expulsions of ambassadors from the United States of America and nine other Western nations.

Last week, the currency hit new records after the Turkish central banking (CBRT), despite rising inflation cut its policy rates by 200 basis points. This shock move was criticized by economists and lawmakers from opposition.

On Sunday, the lira fell to 9.75 GMT (an all-time low) after slipping from Friday’s closing of 9.95950. Erdogan’s remarks on Saturday were the cause of early weakness, according to two bankers. This year, it has dropped nearly 24%.

“I’m worried about Turkish financial markets tomorrow. BlueBay veteran market observer Tim Ash said that the lira would inevitably be under severe selling pressure.

We all know that the Central Bank Governor Sahap (Kavcioglu) has not been given a mandate to raise rates. Therefore, the CBRT will have no foreign currency reserves and the defense is spending the CBRT’s.

Erdogan stated that on Saturday, he had instructed his foreign ministry not to send envoys asking for the release Osman Kala, philanthropist Osman Kavala who was in prison for over four years and has never been convicted.

Sunday evening was the last day that there had been any indications the foreign ministry would follow the instructions of the president. That would be the most severe rift Erdogan has ever created with the West during his 19-year reign.

Erdogan’s political adversaries claimed his request to expulse the ambassadors was a distraction from Turkey’s economic troubles. Diplomats, however, hoped that the expulsions would be prevented.

Three people familiar with the plans said that Turkey’s banks would cut their borrowing costs for loans on Monday. This follows last week’s cut in central bank rates.