U.S. President Donald Trump said he's authorized doubling some metals tariffs on Turkey, citing poor relations with the North Atlantic Treaty Organisation ally amid an escalating conflict over its detention of an American pastor.
The Turkish lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.92 _ still down a whopping 7 per cent on the day.
Mr Trump has castigated Turkey for detaining American pastor Andrew Brunson, who is on trial for terrorism charges for allegedly associating with plotters of the failed 2016 coup against Mr Erdogan.
"This innocent man of faith should be released immediately", Trump previously wrote on Twitter when it became clear Turkey would not release the evangelist, who was ordered to be held under house arrest.
"There are various campaigns being carried out".
Henri Barkey, a professor of International Relations at Lehigh University who follows Turkey closely and has been critical of its President, Recep Tayyip Erdogan, said the new tariffs are "an unnecessary escalation at a time when the decline of Turkish lira was already putting pressure on Turkey".
He said: "If they have their dollar, we have the people, we have Allah". We are working hard. "Look at what we were 16 years ago and look at us now", he said.
Erdogan has previously called himself "an enemy of interest rates" and told state TV ahead of his speech today "we will not lose the economic war".
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The Australian dollar - often viewed as a proxy for global risk appetite because of its commodity reliance - was the biggest faller among developed currencies, down 1 percent on the day.
The currency has lost almost a third of its value this week.
New Finance Minister Berat Albayrak - Erdogan's son-in-law - rolled out the government's new economic plan on Friday, promising central bank independence and tighter budget discipline, but giving few details to reassure investors.
Late on Friday, the rand was trading at more than R14 to the dollar, its worst point since a credit downgrade in November.
Shares in France's BNP Paribas, Italy's UniCredit and Spain's BBVA, the banks seen as most exposed to Turkey, fell as much as 4 percent.
The situation was compounded on Friday when US President Donald Trump tweeted that he had authorised a doubling of tariffs on steel and aluminium.
Investors have become increasingly concerned with the faltering Turkish economy, its central bank's willingness to respond to the downturn and the impact it could have on global financial markets, according to multiple reports.
Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.
Coupled with an inflation rate of almost 16 percent, that could cause a lot of damage to the local economy.