The currency's slide deepened early Friday, after the Financial Times reported that the eurozone's chief financial watchdog was concerned about how some of Europe's biggest lenders would be affected by a crisis in Turkey.
A diplomatic tussle between the USA and its North Atlantic Treaty Organisation ally deepened Friday after President Donald Trump said he had authorized the doubling of tariffs on Turkish steel and aluminum.
Turkey's economy is regarded as fragile because of its high debt, which the global Monetary Fund estimates is 50 percent of its gross domestic product.
On Friday, the euro sagged to a 13-month low against the dollar, down 0.7 per cent to $1.1450, after the Financial Times reported that the European Central Bank was anxious about possible losses at eurozone banks operating in Turkey. The U.S. was Turkey's biggest export market for steel previous year, though exports have fallen since.
Turkey's iron, steel and aluminum exports to the USA were $1.1 billion in 2017 - 0.7 percent of the total exports.
President Donald Trump announced Friday that he plans to double steel and aluminum tariffs on Turkey - prompting the lira to plunge 20 percent - amid heightened tensions between the two North Atlantic Treaty Organisation allies.
He told supporters to "change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".
The currency slid almost 8 percent in relation to the dollar to a record low of 6.59 shortly after Trump announced the increase on metals duties on Twitter.
Without naming countries, Erdogan said supporters of a failed military coup two years ago, which Ankara says was organized by a US -based Muslim cleric, were attacking Turkey in new ways since his re-election two months ago to a new executive presidency.
"There is zero credibility in the Central Bank of Turkey and zero credibility in Turkish policy making". Brunson is now under house arrest in Turkey while standing trial on terrorism charges.
The diplomatic tension and the failure of Turkish officials to persuade the USA to lift the sanctions plunged the lira to new lows this week. A delegation of Turkish officials held talks with their counterparts in Washington this week but there is no sign of a breakthrough.
But President Erdogan brushed off any concerns during a speech in the northeastern city of Bayburt on Friday, saying: 'The dollar can not block our path. "Hopefully we will overcome this disaster and we will also successfully overcome this economic war", Erdogan said.
"The dollar can not block our path".
'However, I say it once again from here.
Turkey's woes have been aggravated by investor worries about the economic policies of Mr Erdogan, who won a new term in office in June with sweeping new powers.
Brunson's charges include spying for the PKK, listed as a terrorist group by both the USA and Turkey, and the Fetullah Terrorist Organization (FETO), the group behind the defeated coup attempt in Turkey of July 2016. "Don't heed them", Erdogan said. Rate increases are the central bank's main tool to support the currency and fight inflation.
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.
'This is a national, domestic battle. As the currency drops, Turkish companies and households with debt in foreign currencies see their debts expand. 'On some days, I end the day with a loss'.