The currency's drop - 41 percent so far this year - is a gauge of fear over a country coming to terms with years of high debt, worldwide concern over President Recep Tayyip Erdogan's push to amass power, and a souring in relations with allies like the U.S. The White House said he had authorized them under asection of US trade law that allows for tariffs on nationalsecurity grounds. "It is a national fight", he said. He did not specify any countries.
"Those who can't compete with us on the ground have brought online fictional currency plots that have nothing to with the realities of our country, production and real economy", Erdogan told a provincial meeting of his AK Party in the Black Sea coastal town of Rize.
"If some of these vulnerabilities crystalize they could tip the economy into a full blown crisis", said its economist Yasemin Engin.
Now the world's worst performing major currency of 2018, it was in the early hours of August 12 down around 40% in the year to date at 6.4300 to the dollar.
The latest escalation between Ankara and Washington was denounced by the Turkish press, with pro-government daily Sabah saying "the currency attack" was no different from the attempted coup of July 2016. 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.
The dollar rose as exposure to Turkey could impact European banks and spark a domino effect throughout Europe as people begin to pull out of those banks and into the USA, said Gregan Anderson, macroeconomic strategist at brokerage Bulltick LLC.More news: Danny Ings: I wish LFC all the success
Some US officials say Turkey is holding Brunson as a bargaining chip after an executive at Turkey's state-owned Halkbank was convicted and imprisoned in the United States in May for helping Iran evade US sanctions.
He said: 'There is definitely contagion from Turkey across emerging markets. Financial upheaval risks further destabilizing an already volatile region.
Ash continued: "I don't think you can understate the geopolitical significance".
The lira tumbled 16 percent against the dollar on Friday.
Erdogan said high foreign exchange rates were being used as a weapon against Turkey.More news: Spain’s Gerard Pique retires from global football
Asli Aydintasbas, senior fellow with the European Council on Foreign Relations, stated that Erdogan's speech "was clearly defiant", but Turkey's economic situation continues to appear ever more dire.
Addressing for the first time on Friday to a rally of his supporters, he said, "If they have dollars, we have our people, we have our right and we have Allah!"
"These are the bullets, cannonballs and missiles of an economic war waged against our country", he said. It has stepped up sanctions against countries such as North Korea, Iran and Russian Federation, among others. Erdogan has appealed to the people to convert their dollars to liras, saying Turkey is in the midst of an "economic war" with the West.
"Before it is too late, Washington must give up the misguided notion that our relationship can be asymmetrical and come to terms with the fact that Turkey has alternatives".
"The US and Turkey are breaking up".
On Friday, Erdogan spoke by telephone with Russian President Vladimir Putin.More news: New Chelsea star Jorginho has an wonderful penalty routine