Turkey's lira plunged to its lowest level in more than a month against the dollar on Monday on fears of an incursion by Ankara into northern Syria and President Donald Trump's warning that it could "erase" the Turkish economy.
Investors have been watching tensions between Ankara and Washington in recent months, with NATO members at odds over issues including the situation in Syria and Turkey's purchase of Russian missile defense systems.
Turkey has repeatedly threatened to launch an operation against the US-backed Kurdish People's Protection Units (YPG) in northeastern Syria, accusing Washington of obstructing efforts to establish a "safe zone" there on the Turkish border.
After a phone call between Trump and Turkish President Recep Tayyip Erdogan, the White House said on Sunday that US forces would not support a Turkish incursion and would withdraw from the region.
Yesterday, Trump threatened to "destroy and wipe out" the Turkish economy if Ankara took any move he saw as "cross-border."
The lira fell more than 2% to 5.8305 at 18:30 GMT, after closing at 5.7000 on Friday. Earlier, it fell to 5.8375 pounds to the dollar, the weakest level since September 2.
"While the US statement gives a green light to the military operation in Syria, which Turkey has been talking about for a long time, it raises many question marks about how the process will evolve," said a foreign exchange trader who asked not to be named.
The dollar bonds of Turkey also fell, and the issue of 2038 fell by 1.3 cents.
The lira lost about 30% of its value against the dollar last year due to concerns about political interference with monetary policy, as well as the deterioration of relations between Washington and Ankara. The lira has fallen about 8% since the beginning of this year.
The main index of Turkish shares closed down 0.45%, while the banking sector index fell 1.72%.
Trump said yesterday that he had warned Erdogan of "a big problem" if any US soldier was hurt in the part of which Ankara has threatened to penetrate from Syria.
He also said he told Erdogan, whom he spoke by telephone on Sunday, that "there will be a big problem if one of our children is harmed."
"I have told Turkey that if they do anything beyond what we think is human, they will face the consequences of a very dilapidated economy," he concluded.