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Turkey is blocking foreign investors from selling the lira in order to impede a currency slide which some fear may hurt the leading Justice and Development Party's (AKP) chances in Sunday's local elections.

Foreign hedge funds trying to offload Turkish currency - already the second-worst performing major currency this year - since last week, when the currency began to unexpectedly decline, have been stymied by Turkish banks.

The offshore overnight swap rate - the cost to investors of exchanging the lira for foreign currency - jumped to 700 percent on Wednesday, after already hitting 325 per cent the previous day - an 18 year high.

Analysts say that the rising swap rate is an attempt by the government to halt the currency decline which began anew last week.

It is crucial for the Turkish government to halt a currency slide, as it did before the June 2018 elections which saw Recep Tayyip Erdogan elected as the country's first near-all-powerful executive president.

The country was unable to halt that decline which led the market into freefall in August, the economy into a recession and inflation towards a 15-year high.

Since then, Turkish citizens have suffered a sharp rise in the cost of living and have converted savings en masse into dollars and euros in order to secure them.

While Erdogan blamed the 2018 crisis on foreign powers seeking retribution for the detention of US pastor Andrew Brunson, oppositional Turks say a currency crash is a long overdue event for an economy developed with cheap foreign loans and precarious foreign investment.

While raised interest rates led investors to trust in the future strength of the lira following the Summer 2018 crisis, it was reported last week that Turkey's central bank has drawn down its foreign-exchange reserves in March, which some say is a sign the country is trying to shore up the lira before the elections.

After foreign banks including JPMorgan Chase & Co. called on investors to sell the lira, foreign investors scrambled to offload their Turkish holdings.

The lira then slid by 5.1 percent on Friday, marking another stage in an ongoing crisis for the Turkish economy and prompting the central bank to suspend lending at its benchmark rate.

Erdogan railed against the call for short selling, warning that bankers responsible for currency speculation would be punished.

Turkish regulators said on Saturday they were investigating JPMorgan for alleged market manipulation. Citigroup and Deutsche Bank may also be punished for currency manipulation, Hurriyet reported on Wednesday.

Such threats only increased investors' desire to sell the lira, but they have found themselves unable to trade currency as local lenders are under pressure not to provide lira, bankers told Bloomberg and the Financial Times.

The bid to halt the currency decline in the days before Turkey's local elections appeared to have been successful, with the lira having registered gains on Monday and Tuesday, but it gave up some of those gains on Wednesday to 5.38 to the dollar by noon in Istanbul.

While Sunday's local elections will not change the shape of the country's political landscape, as Erdogan, in power as president until at least 2023, holds the vast majority of decision making powers, the battle of who controls Turkey's cities is nonetheless important.