The Institute of International Finance (IIF) downgraded the fair value of the Turkish lira by 42 percent to 16.5 per dollar.

The IIF sees the lira weakening due to credit expansion, which was widening Turkey's current account deficit even before the Ukraine crisis escalated and pushed up commodity prices, said Robin Brooks, chief economist at the IIF.

On Monday, the lira fell less than 0.1% to 14.84 per dollar.

The Turkish lira has fallen to a record low against the dollar in the past 12 months and has shed 44 percent of its value in 2021. Investors and locals stepped up sales of the currency after President Recep Tayyip Erdogan ordered the central bank to cut interest rates to 14 percent late last year despite a surge in inflation. Consumer price inflation rose to 54.4 percent in February.

Brooks, a former chief FX strategist at Goldman Sachs, has kept the IIF valuation unchanged since last May despite the lira's sell-off, predicting a correction driven by a sharp slowdown in economic activity and a narrowing current account deficit.

The latest in a series of economic programs designed by Erdogan and the finance ministry in the wake of the previous currency crisis in 2018, the current account surplus and inflation slowdown. The current account recorded a $7.1 billion deficit in January, the biggest in four years.

Erdogan announced a scheme to peg Turkish lira deposits to the dollar on December 20 after the lira hit a new record low. But the losses for the currency have continued this year - since January 1, it has fallen by about 10 percent against the dollar.