The Turkish lira fell against the USA dollar due to mounting tensions between Turkey and the USA in the wake of Ankara's refusal to release American pastor Andrew Brunson who is suspected of being involved with a terrorist group.
More broadly, concerns over the sickly Turkish economy's wider impact were intensified Friday by a report in the Financial Times that the supervisory wing of the European Central Bank had began to look more closely at eurozone lenders' exposure to the country.
Today's declines have dragged down European shocks, with the Stoxx Europe 600 falling three per cent on its exposure to banks and miners. Wall Street was set for a weak open.
Turkish President Recep Tayyip Erdogan has brushed off the plunging value of the lira and a rift with the U.S., telling Turks: "If they have their dollars, we have our people, our God". A strengthening dollar and higher USA interest rates are making life hard for the weakest emerging markets.
The lira has fallen more than 35 percent this year after losing almost a quarter of its value in 2017. The currency has shed 22pc of its value since late July.
Adding to emerging market currency woes was the Russian rouble, which weakened to 67.12 to the dollar.
"Other EM currencies have held their ground against the dollar, having generally been weakening previously", said analysts at Capital Economics.
The Australian dollar, often viewed as a gauge of global risk appetite due to its reliance on commodities, was the biggest faller among developed currencies, at one point down 1 percent on the day.
Erdoğan also said Turkish people should not worry, saying "We also have measures to guard against all negative possibilities".
In commodities, US crude oil CLc1 fell 0.5 percent to $66.51 a barrel, while Brent crude LCOc1 was 0.4 percent lower at $71.77 per barrel.
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