Turkish lira\, markets fall after vote results scrapped

Turkey's lira hit dangerous waters on Tuesday .... After election officials ruled to scrap and re-run a mayoral election here in Istanbul.

The currency sank 1.3 per cent - and Turkish stocks saw a 1.9 per cent sell-off .... In a morning where President Erdogan declared why the result of the March vote - which his party lost - was being overruled.

(SOUNDBITE) (Turkish) TURKISH PRESIDENT, TAYYIP ERDOGAN, SAYING: "It became clear that certain people with dirty hands had become involved ..... We sincerely believe that there was organised corruption, full illegality and irregularity." The opposition has slammed the decision as a blow to democracy.

But their local supporters say they'll cast their ballots again anyway in next month's revote .

(SOUNDBITE) (Turkish) RESIDENT OF ISTANBUL AND PHYSICAL THERAPIST, SENAY CAN, SAYING: "There are no rights and no laws but we will go to the polling stations.

Everything will be good and this time we will win with more votes." For investors, the questions sharpen over Erdogan's commitment to the rule of law and to reforms. Amid high inflation and low employment, a 14 per cent slide in the lira this year follows a 30 per cent drop last year.

And there's further unease over central bank policies and a threat of US sanctions.

Erdogan vowed to fend off what he called attacks on Turkey's economy.

But with bonds also joining Tuesday's action with their biggest sell-off in months .... Markets appeared unconvinced by his rhetoric.