UPDATE 2-Turkish lira hits weakest level since 2018 currency crisis due to coronavirus

(Adds economist comments, Ford Otosan, background)

ISTANBUL, March 19 (Reuters) - Turkey’s lira weakened more than 0.8% on Thursday to its weakest level since September 2018 as the spread of the coronavirus weighed on sentiment and the U.S. currency surged globally.

The lira stood at 6.5370 against the dollar at 1055 GMT, its lowest level since the heights of a currency crisis two years ago.

The currency closed at 6.4825 on Wednesday and has lost some 8.5% of its value against the U.S. dollar so far his year.

Jason Tuvey, senior emerging markets economist at Capital Economics, said the lira had held up relatively well amid the selloff in emerging market currencies.

He said President Tayyip Erdogan’s call for Turks to stay home for at least three weeks would lead to severe disruptions of economic activity.

“This... comes at the same time that a downturn in the global economy will hit export-oriented sectors and travel restrictions will lead to a slump in the tourism industry.

“The overall result is that the Turkish economy looks set to contract sharply in Q2,” he said.

Turkey announced a second death from coronavirus on Wednesday and said cases of the illness had nearly doubled to 191 as it ramps up steps to contain its spread, closing cafes, banning mass prayers and halting flights to 20 countries.

Some clothing retailers, including Mavi Giyim and Vakko Tekstil, said they were temporarily shutting stores after President Tayyip Erdogan advised Turks not to leave home for three weeks unless necessary.

The main share index was up 0.2%, while the banking index fell 0.3%. Shares of Mavi Giyim and Vakko Tekstil were down 6.71% and 6.01% respectively.

Commercial vehicle producer Ford Otosan’s shares dropped 8.47% on Thursday, after it said it would suspend production for two weeks at three plants. (Reporting by Daren Butler, Ezgi Erkoyun and Ali Kucukgocmen Editing by Dominic Evans and Mark Heinrich)