The Turkish lira fell almost 9% on the early trading day on Monday as investors fear the financial crisis will spread to European markets.
Despite Turkish President Recep Tayyip Erdoğan's defiant words at the weekend that announced unspecified measures to reverse the decline, the currency was at US $ 6.99 on Monday at 2.30 am, down 8.7 % on Friday.
It had previously fallen to an all-time low of 7.24 before it had bottomed out after the country's banking regulator announced late Sunday night that it would limit swap transactions to the troubled currency.
The Asian stock markets also declined on Monday. The Nikkei in Japan lost 1.2%, Hong Kong lost 1.2% and the Taiwanese stock market fell 2%.
The euro hit an annual low on Monday as the falling lira spurred demand for safe havens, including the US dollar, Swiss franc and yen.
The lira has shrunk more than 40% this year, worried about Erdoğan's increasing control over the economy and deteriorating relations with the United States, mainly because of the war in Syria.
The decision by a Turkish court to extend the imprisonment of Andrew Brunson, an American spy preacher of Kurdish militants and the Gülen movement that accused the coup in 2016, forced Donald Trump to double US tariffs on Turkish steel last week.
Chris Weston of the online trading company IG Market in Melbourne warned that global markets would be tense after the escalation of the crisis.
"Following a monster sale last week in the lira and a renewed focus on an effective balance of payments crisis, the focus remains on what sustainable measures can be implemented and whether this will impact on European financial institutions," he said.
"Surely the last problem was really put to the test by the European Union's financial oversight, which has expressed its concern about the EU's financial constraints on Turkey, so if it's about this institution, it should be for traders too ,
"The collapse of the lira, which began in May, seems to be driving the Turkish economy into recession and could trigger a banking crisis," said Andrew Kenningham, chief economist at Capital Economics.
"This would be another blow to the EM as an asset class, but the wider economic spillover effects should be quite modest, even for the Eurozone," he added.