Moody's added that that the central bank may reduce the policy rate to below the level of inflation to push growth under new Governor Sahap Kavcioglu, who shares the same dovish views as Erdogan. Such steps, it said, could lead to higher imports and a larger current account deficit.
Turkey's shock weekend decision to replace its hawkish central bank governor also supported the dollar's safe-haven appeal.
Markets have been slow to catch on to the rising dollar theme in recent weeks as investors had bet that a global economic recovery would prompt buying of riskier currencies.
The yen rose against the euro and the antipodean currencies on speculation that Japanese investors who have been buying the lira recently for its high rates will cut losses and close out their positions.
The key one-week repo rate is the highest of any big economy and it is back to levels last touched in mid-2019. It had stood at 17% since December after aggressive monetary tightening last year.
The central bank has now tightened policy by 875 basis points since Erdogan appointed Agbal in November, when the lira touched a record low. It had rallied 20% after the appointment.
The exchange rate used by Reuters on Thursday was 7.1924 compared to 6.9527 the previous week.
The reserves plunged last year as state banks sold off an estimated total of $130 billion to stabilise the ailing lira, which still lost 20% of its value in 2020.
The lira weakened as far as 7.4540 against the US currency from a close of 7.3425 on Tuesday and stood at 7.4320 at 1400 GMT. After strong gains until mid-February, the lira has retreated back to end-2020 levels.
