* Lira hits all-time low of 2.6290 against dollar
* Citi’s sale of Akbank stake drags down banking stocks
* Doubts grow over president’s battle with central bank, econ team
* Prime Minister asserts central bank has independence (Adds Davutoglu comment on central bank independence)
By Nevzat Devranoglu, Ece Toksabay and Daniel Bases
ISTANBUL/NEW YORK, March 5 (Reuters) - Turkey’s lira hit an all-time low on Thursday as meetings with investors in New York did little to allay concern over President Tayyip Erdogan’s battle with the central bank or Ankara’s economic management team.
Prime Minister Ahmet Davutoglu told reporters in New York he believed the meetings had been successful and said he had spoken with Central Bank Governor Erdem Basci about the lira weakness.
“Here what we need to understand is that, yes, central bank is independent and it is taking its own decision. At the end of the day the performance of the central bank and performance of monetary policy is part of general economic performance,” Davutoglu said later during a webcast from the Council on Foreign Relations in New York.
The lira weakened about 2 percent to a record low of 2.6290 to the dollar, and underperformed emerging markets peers that mostly firmed. It stood at 2.6051 to the dollar by 0014 GMT.
Investors have been rattled by Erdogan’s demands that the central bank, which is battling inflation as well as the weak lira, must deliver sharper interest rate cuts.
Efforts by Davutoglu, Deputy Prime Minister Ali Babacan and Finance Minister Mehmet Simsek to reaassure New York investors, who hold more than a fifth of the main Turkish stock index , appeared to have had little immediate effect.
“There is a fear that we are facing a scenario where for the first time in 12 years not even Babacan has been able to convince investors,” a forex trader at a bank in Istanbul said.
“The selling is largely foreign. Even if the aim of the prime minister ... was to strengthen investor confidence, what’s happening at the moment creates fear the opposite has happened.”
Bank stocks tumbled 4 percent, partly on fears the lira’s depreciation would feed through to inflation and trigger losses on their bond portfolios.
Davutoglu himself was upbeat about the investor meetings.
“I believe the talks went very successfully. ... The comments were very encouraging,” he told a news conference, adding that the lira’s weakness reflected dollar strength globally.
“It can’t be linked solely to debates in Turkey. All our institutions are taking the necessary measures in connection with the dollar strength. After the initial rise, I held talks yesterday with our central bank governor,” he added.
Erdogan’s rhetoric has raised concern about the futures of Central Bank Governor Erdem Basci and Babacan, in charge of the economy and an anchor of investor confidence who looks increasingly unlikely to return after a June general election.
“An emerging Turkish lira crisis, made at home,” said Timothy Ash, head of Standard Bank’s emerging market research. “It is absolutely perverse how Turkey’s policy makers have been driving this attack on the (central bank), in an effort to force rates lower.”
Davutoglu downplayed political pressure when asked about it at a lunch organised by Goldman Sachs in New York on Wednesday. He said other countries also criticised their central banks, according to one veteran investor present.
The lira, which has fallen some 10 percent so far this year, was also trading at its lowest since January 2014 against a euro/dollar basket.
Turkey’s banking index fell around 4 percent, after Citi sold its 9.9 percent stake in Akbank. Shares in Akbank were down 5 percent.
The wider Istanbul stock index closed down 1.57 percent, lagging a 0.11 percent fall in the emerging markets index. The benchmark 10-year bond yield fell to 8.19 percent from 8.26 percent at Wednesday’s close. (Reporting by Nevzat Devranoglu and Ece Toksabay in Istanbul and Daniel Bases in New York; Editing by Richard Chang; Writing by Dasha Afanasieva and Daren Butler; Editing by Nick Tattersall and Ralph Boulton)