The Turkish lira fell past 6.1 against the US dollar after the Supreme Election Council orders a rerun of Istanbul mayoral election for June 23.
The Turkish lira weakened further on Tuesday and was at 6.16 against the US dollar at 1010 GMT, day after Turkey's Supreme Election Council (or YSK) announced a do-over local election in Istanbul will be held on June 23.
The lira declined from Monday's closing rate of 6.0140.
The currency has lost over 12 percent in value so far this year against the greenback.
YSK members accepted the governing Justice and Development (AK) Party's objection to the local election results in Istanbul with seven votes in favour and four against.
According to the YSK, the decision was taken as some presiding officers and polling staffs, who are supposed to be civil servants as per Turkish law, served during the elections.
The mayoral certificate of the main opposition Republican People's Party (CHP)'s Ekrem Imamoglu has also been cancelled by the council.
Turkey's benchmark stock index fell by 2.35 percent or 2,180.99 points to open at 90,801.28 points on Tuesday.
On Monday, Borsa Istanbul's BIST 100 index decreased by 1.03 percent to close the day at 92,982.27 points with a daily trading volume of $737.8 million.
The euro/Turkish lira exchange rate also increased to 6.89, versus 6.73 at the previous close.
One British pound traded for 8.07 Turkish liras, as the GBP/TRY exchange rate was 7.89 at market close Monday.
The price of Brent oil was around $71.19 per barrel as of 0700 GMT on Tuesday.
Experts say suspense over YSK order has left investors worried that weeks of additional campaigning would divert funds and attention from addressing economic reforms.
"This will leave Turkey's economy vulnerable, given risks to macro-financial stability in the period to July," said Timothy Ash of Blue Bay Asset Management.
The country's faces inflation which is near 20 percent and unemployment near 15 percent.