One U.S. dollar traded at 5.96 lira by 2:15 p.m.
Reverberations spread through global markets, with European stock markets especially hit as investors took fright over banks' exposure to Turkey.
Washington and Ankara have been at odds over a wide range of topics - from diverging interests in Syria to Turkey's ambition to buy Russian defence systems, and the case of evangelical U.S. pastor Andrew Brunson.
UBS chief economist for EMEA emerging markets Gyorgy Kovacs said a giant rate hike of 350-400 basis points would be "consistent with real rate levels that in the past helped to stabilise the currency" but warned a deal to normalise ties with the U.S. may also be needed.
Prices for gold and Treasury bonds, investments seen as safe havens during global turmoil, also rose.
"The US runs the risk of losing Turkey as a whole". But the immediate trigger is North Carolina pastor Andrew Brunson, who has been detained in Turkey's Aegean province of Izmir since October 2016 on thinly supported espionage and terror charges.
In July, US President Donald Trump threatened to impose large sanctions on Turkey if he refused to free Brunson, and on 1 July announced economic punishments against Turkish Justice Ministers Abdulhamit Gül and Interior Minister Suleyman Soylu.
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He wrote: 'I have just authorised a doubling of tariffs on steel and aluminium with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong dollar!'
"Our relations with Turkey are not good at this time!" hewrote".
Shares of Turkish steelmakers Kardemir Karabuk Demir Celik Sanayi ve Ticaret AS and Eregli Demir ve Celik Fabrikalari TAS plunged as much as 8 per cent and 9.9 per cent, respectively, after Trump's tweet. A Republican ally of the president, Sen.
But Trump's tweet Friday may change that.
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. "Turkey has been trending towards authoritarianism & becoming more anti-American".
The diplomatic dispute with the US was one of the triggers that turned market jitters into a full-blown rout this past week.
Reminding the world of the time when Turkey rushed to America's help whenever necessary, during the past six decades, Erdogan recounted Turkish contribution in defusing the Korean and Cuba missile crises, and sending troops to Afghanistan in the wake of the September 11 terror attacks. In response to Turkey's tightening embrace of Russia, Congress slapped a hold on delivery of F-35s to the Turkish air force, for fear that the Russians would be invited to examine the world's most advanced stealth warplane.