The lira slipped below 7.0 to the US dollar and was down 12 percent on Friday’s value at one point this morning.
The currency is collapsing after Donald Trump doubled import duties on steel and aluminium as part of fresh sanctions on the country.
The countries are embroiled in a diplomatic row sparked by the case of US evangelic pastor Andrew Brunson, which Turkey wants to try on terrorism charges believing he was behind the attempted coup on President Recep Tayyip Erdogan two years ago.
The euro had already plunged after the tariffs were imposed on Friday, with the currency dropping to a 13-moth low this morning.
The fresh lira collapse on Sunday night hit Asian shares, weakened the South African rand and drove demand in global markets for safe currencies including the dollar, Swiss franc and yen.
Investec economist Philip Shaw said: “There’s a risk-off mood generally triggered by the Turkish currency sell off, and we are seeing a wider sell-off now, and it’s looking pretty ugly in other emerging markets as we.”
The euro slid as low as $ 1.1365 before recovering slightly today.
The pound sterling opened at a 13-month low as the dollar continues to rise in the wake of the lira’s decline.
The Turkish lira is sending other currencies plummeting
Andrew Kenningham, chief global economist at Capital Economics, said: “The plunge in the lira which began in May now looks certain to push the Turkish economy into recession and it may well trigger a banking crisis.
“This would be another blow for emerging markets as an asset class, but the wider economic spillovers should be fairly modest, even for the euro zone.”
The Russian rouble slumped to a near low for the first time in two-and-a-half years. The Indian rupee and slid to an all-time trough.
The South Africa rand has been weakened to as low as 14.50 rand per dollar, which is its lowest level since June 2016.
A map of the currency’s affected
It is also down more than 10 percent from late last week.
The Indonesia rupiah hit its lowest in almost three years and prompted an intervention from the country’s central bank.
The ripple effect has also been felt in Mexico and Argentina with their pesos also dropping.
Ulrich Leuchtmann, an FX strategist at Commerzbank in Frankfurt, warns that with the worldwide tumbles could result in a full-blown crisis.
He said: “The big fear in the market is that we are headed for a full-blown emerging market crisis.”
Mr Leuchtmann said he believed that “we are fundamentally in a different position” because many emerging market central banks retained the confidence of the market after hiking interest rates over the past year.
China’s yuan weakened 0.5 percent – its steepest daily decline in nearly four weeks.
The Japanese Yen has risen to a six week high after climbing for a second day. But the Asia-Pacific shares outside Japan had fallen 1.7 percent.
Erdogan has said Turkey is not in a financial crisis
But analysts expect Asia to ride out the storm thanks to ample foreign exchange reserves and prudent fiscal and monetary policies.
Analysts at Singapore’s DBS said: “Asia should not see any contagion effect fundamentally due to the ongoing crisis in Turkey as the region does not have a meaningful exposure to the country.
“We would see any meaningful correction in bond prices on the back of the Turkey developments alone, as a buying opportunity.”
President Reccep Tayyip Erdogan told supporters today there is no suggestion Turkey is in a financial crisis like those seen in Asia two decades ago.
The lira has plunged to its lowest level yet
He insisted the lira’s free-fall was the result of a plot and urged residents to exchange dollars and gold for lira.
He called on the nation to stand united against America, while Iran and Russia also lent their support against Washington.
Mr Erdogan said: “What is the reason for all this storm in a tea cup? There is no economic reason. This is called carrying out an operation against Turkey.”
A Turkish presidential spokesman has insisted the country’s economy is strong and said nobody should pay attention to “speculation”.
The spokesman said the Treasury, Central Bank and Banking Watchdog were all taking the necessary steps to bring the matter to an end.
The currency has tumbled more than 40 percent this year over Erdogan’s ambitions for more control over the economy as well as crumbling relations with the United States.
On Friday Mr Trump announced he was doubling the tariffs on steel and aluminium imports from Turkey.
He tweeted: “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!
Trump has doubled tariffs on steel and aluminium Trump has doubled tariffs on steel and aluminium
“Aluminium will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!”
Shares of Turkish steelmakers Kardemir and Erdemir immediately plunged as much as eight percent and 9.9 percent respectively after Trump’s tweet.
Turkish Foreign Minister Mevlut Cavusoglu said during a speech in Ankara his country had done enough to repair its ties with the US and accused Washington of acting contrary to their alliance regarding fundamental security issues.
He also said the US should learn that it will not achieve any results by threatening Turkey.
Latest currency exchange figures at time of publishing:
South Africa – 14.50 rand per $ 1
Russia – 67.8 rouble per $ 1
Indonesia – 14,607.90 rupiah per $ 1
India – 69.78 rupees per $ 1
Mexico – 19.27 peso per $ 1
Argentina -29.23 peso per $ 1
Europe – $ 1.13 per €1
United Kingdom – $ 1.27 per £1
Japan – ¥110.4 per $ 1
China – CNY6.88 per $ 1
Switzerland – $ 1.00 per 0.99 franc