(Bloomberg) -- The Turkish lira retreated as traders assessed prospects for monetary and fiscal policy after President Recep Tayyip Erdogan appointed former Deputy Prime Minister Lutfi Elvan as treasury and finance chief.

The currency fell as much as 3.8% in early Istanbul trading, after surging 5.8% on Monday, the most on a closing basis in more than two years. The lira traded 2.9% weaker at 8.3023 per dollar as of 11:14 a.m. in Istanbul, leading declines among emerging-market currencies.

Berat Albayrak’s exit from the finance ministry, along with Erdogan’s firing of central bank Governor Murat Uysal, may usher in a new era for Turkish economic policy, although it remains unclear whether the president’s unorthodox policy preferences will be rejected or more wholeheartedly embraced under new management.

Overseas investors flocked to the Turkish currency on Monday, betting new central bank governor Naci Agbal will bring more orthodoxy to monetary policy by raising interest rates In his first statement, Agbal promised to “review the current situation and expectations” before a monetary policy meeting next week.

“The rally was more of a hopeful, knee-jerk reaction, that a changing of the guard would also result in a change of policy,” said Todd Schubert, head of fixed-income research at Bank of Singapore. “The realization is that what is necessary to stem the decline of the lira is an independent monetary authority that will implement orthodox monetary policies to stem inflation, which is widely accepted to mean raising rates.”

Read more: Turkey Investors Weigh Possible Policy Moves After Shakeup

©2020 Bloomberg L.P.