(Bloomberg) -- Turkey’s currency weakened to a record low Wednesday amid concerns about external financing needs, a day after stocks rallied as investors bet President Recep Tayyip Erdogan’s new cabinet could steer the country toward more orthodox economic policies.

The lira slumped as much as 1.5% to 20.7760 per dollar, extending its decline to a seventh day. A key concern for traders is Turkey’s external financing, with the country having depleted its foreign-currency reserves and with more than $200 billion of debt payments coming due.

Meanwhile, the Borsa Istanbul Banks Index, a gauge that tracks shares of Turkish lenders, closed 9.2% higher yesterday, its best daily performance since May 11. The broader Borsa Istanbul 100 Index rose 3.8%.

“Local investors in Turkey may be relieved that there’s no instability in the political situation,” Shota Akimoto, a senior emerging-market economist at SMBC Nikko Securities Inc. in Tokyo, said of the gain in Turkish stocks. “Investors, especially foreign ones, may be thinking significant tightening of monetary and fiscal policies can’t be expected.” 

Erdogan met Mehmet Simsek, a market-friendly former finance minister, in the capital Ankara on Monday, according to people familiar with the discussions. The president is expected to announce a new cabinet as early as Friday. 

READ MORE: World Tries to Read Erdogan for Signs of Policy Shift in Turkey

The meeting has fueled expectations that Simsek may return to Erdogan’s administration and help steer the economy toward more orthodox economic policies. At the same time, a shift in economic policymaking may mean government steps to support the currency get scaled down, said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG.

“There is a risk that the lira will not be supported to the same extent going forward and that the depreciation pressure that accumulated over the past months might be unleashed,” he said. Even so, the speed of the depreciation would remain hard to predict, he said.

Turkey’s sovereign dollar bonds are set to post the worst monthly losses in emerging markets. The notes have lost 5.8% this month, compared with the 1.6% average loss for emerging-market dollar bonds, according to a Bloomberg index.

The lira was 1% weaker at 20.6610 per dollar by 8:27 a.m. in Istanbul.

--With assistance from Masaki Kondo.

(Adds fresh trading level for the lira in final paragraph.)

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