Turkish lira hits all-time low versus the U.S. dollar.
The country's economy is viewed as imbalanced due to rampant inflation.
The United States has also threatened to impose "big sanctions" over a U.S. pastor.
President Donald Trump (L) welcomes President Recep Tayyip Erdogan (R) of Turkey outside the West Wing of the White House May 16, 2017 in Washington, DC.
The Turkish lira has collapsed to an all-time low against the dollar, but the country's leader has brushed aside concerns, telling Turks "we have our God." The Turkish President Recep Erdogan then followed those comments up Friday by urging Turks to sell dollars and gold and buy lira.
At around 8:00 a.m. ET Friday, the lira had fallen to $7.081, an almost 11 percent loss for the session. It has since pared some losses. As recently as April one dollar bought about four Turkish lira.
The first wave of selling came early Friday after a Turkish delegation returned from the United States with apparently no progress on the detention of a U.S. pastor. The evangelist, Andrew Brunson, is charged with supporting a group blamed for an attempted coup in 2016.
President Donald Trump said in July that the U.S. would place "large sanctions" on the country for the pastor's detention. On Friday, Trump appeared to back that position up by posting on Twitter that he would double the level of tariffs on steel and aluminum to 20 percent and 50 percent respectively.
So far there has been no confirmation to CNBC of the policy from the United States Department of Commerce.
Late Thursday, and prior to Trump's tweet, Erdogan said he would stand up to pressure from the United States.
"There are various campaigns being carried out. Don't heed them," Erdogan said Thursday. "Don't forget, if they have their dollars, we have our people, our God. We are working hard. Look at what we were 16 years ago and look at us now," Erdogan told supporters.
On Friday afternoon Erdogan dug in again, calling for citizens to convert out of dollars and gold and buy the lira to help fight a "national struggle". In response, the currency renewed its sell-off. In his speech in the northeastern city of Bayburt, Erdogan added that he would decisively defend the country against economic attacks.
The lira's three-month implied volatility gauge hit its highest since late 2008. Implied volatility shows the market's opinion of the currency's potential moves. If the implied volatility is high, the market things the currency has potential for large price swings in either direction.
European bank concern
The euro dropped 0.5 percent against the dollar on Friday morning, following reports that the European Central Bank (ECB) is concerned over the impact of a weak Turkish lira on European banks.
According to the Financial Times, the lira's depreciation could hurt European banks such as Spain's BBVA, Italy's UniCredit, and France's BNP Paribas in particular.