ISTANBUL, Jan 31 (Reuters) - Turkey has purged at least 700 more police officers, local media said, over a corruption investigation portrayed by Prime Minister Tayyip Erdogan as part of a plot to undermine the country's economy and his government.
Turkey's Central Bank raised all key interest rates by some 500 basis points at an emergency meeting on Tuesday. Erdogan had long argued against the move that could hit growth ahead of polls this year seen as an important test of his popularity.
A photograph in the Hurriyet daily showed staff at Istanbul's main courthouse carrying boxes of documents which the paper said were from the offices of two prosecutors who were removed from the graft inquiry this week.
Altogether, more than 5,000 police officers have been dismissed or transferred since the graft inquiry became public on Dec. 17 with the arrest of businessmen close to Prime Minister Tayyip Erdogan and three cabinet ministers' sons.
In the latest upheaval, hundreds of police were transferred from their posts in Ankara and Izmir on Thursday, and dozens more were affected in Istanbul and the southeastern city of Gaziantep, Radikal newspaper reported.
A spokesman at police headquarters in Ankara could not immediately confirm the reports.
A similar shake-up in the judiciary has left the fate of the corruption investigation unclear.
Some 200 prosecutors and judges have been reassigned in a purge of the judiciary that has brought to a halt the investigation Erdogan has called a "judicial coup".
The government sees the probe as orchestrated by Erdogan's former ally, the U.S.-based cleric Fethullah Gulen, whose followers, part of a group known locally as "Hizmet," or Service, are influential in many state institutions, including the police and legal system.
LIRA REMAINS WEAK
There is as yet no sign the graft scandal and Erdogan's purging of police and judiciary he sees as engineering it has produced any significant fall in his popularity.
Erdogan's AK Party has won three elections since 2002. A hitherto weak opposition sees local elections next month and a presidential poll later this year as an opportunity to make inroads into his vote.
When the corruption investigation first came to light, anti-government newspapers showed photographs of police removing shoeboxes full of money from an official's house. The investigation has since faded somewhat from public view.
The removal of the prosecutors this week was part of a reshuffle this week in which some 90 prosecutors were reassigned by newly appointed Istanbul chief prosecutor Hadi Salihoglu.
Ankara has also relieved state employees of their duties at other state bodies including the banking and telecoms regulator and the state broadcaster, firing dozens of executives.
The central bank raised interest rates by around 500 basis points on Tuesday causing a spike in a currency that has been falling steadily.
But the lira has since erased much of those gains, returning to where it was just before the rate hike, although it is still some way from Monday's record low of 2.39. It was trading at 2.2735 to the dollar by 1100 GMT.
Ratings agency Moody's said on Friday that pressure on the currency was likely to continue despite the rate hike, which it said had also significantly weakened Turkey's growth prospects.
Erdogan has said "a Plan B or a Plan C" for the economy may be announced by the government in the coming days or weeks, although his ministers have given no details, beyond saying capital controls are out of the question.
(Additional reporting by Ece Toksabay; Writing by Daren Butler; Editing by Ayla Jean Yackley and Ralph Boulton)
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