The Turkish central bank raised its overnight lending rate to 12 percent from 7.75 percent and the overnight borrowing rate to 8 percent from 3.5 percent late Tuesday, in a surprisingly strong move to defend the country's embattled currency. The lira immediately strengthened to 2.2 to the dollar from 2.253 after the decision. The rate hike was much sharper than expected; eight economists polled by the Wall Street Journal had expected an increase of three percentage points at the most. Dow futures spiked 150 points on the closely watched move, while Asia equity markets opened higher as the strong action by Turkey lifted investor sentiment. "The shock and awe of this move was important, we'll have to see now if it sticks," David McAlvany, CEO of McAlvany Financial Group, told CNBC Asia's "Squawk Box." (Read more: Turkey: What's going on and why you should care)

Two hundred denomination Turkish lira banknotes Kerem Uzel | Bloomberg | Getty Images

Emerging markets have come under renewed pressure in the past week, hurt by concerns about China's economy and the impact of a tapering of the U.S. Federal Reserve's monetary stimulus - especially on those countries with a high debt burden. (Read more: Will the Fed throw emerging markets a bone?)

Local investors have been selling the lira in favor of foreign currencies, and international investors have been staying away from the Turkish currency, pushing its value down to record lows earlier this week. The cost of Turkey's debt is also rising alarmingly quickly, with 10-year debt hitting 10.45 percent, its highest since 2010.

"The reason the lira was depreciating was because there was no confidence at all that the central bank would act appropriately," said Ed Ponsi, managing director at Barchetta Capital Management. "Tonight we have re-established trust in the central bank of Turkey." Turkey is not the only emerging market to suffer in recent weeks, with Argentina and Ukraine both punished for political turmoil and large current account deficits. (Read more: Emerging market currencies: A well-thought-out crisis)