The currency has lost more than 40 per cent against the dollar this year, largely over worries about President Tayyip Erdogan's influence over the economy, his repeated calls for lower interest rates, and worsening ties with the United States.
It dropped as much as 18% at one stage, rattling U.S. and European stocks as investors took fright over banks' exposure to Turkey.
The Turkish lira has hit record lows after dropping nearly 9% in early trading on Monday, fuelling fears that the country's economic downturn may trigger a global crisis. Shares in Europe's major banks also lost ground.
Finance Minister Berat Albayrak said in an interview with Turkish newspaper Hurriyet on Sunday that the government has drafted an economic action plan that it will start implementing on Monday morning.
Following the central bank's promises on Monday, the lira pulled back from a record low of 7.24 against the dollar, strengthening to 6.4, before weakening again to 6.92. In Turkey, unlike nations such as the USA and those in the European Union, the central bank is controlled by the government, allowing control over interest rates and inflation.
Separately, the TCMB said it would reduce the reserve requirement ratio (RRR) by 400 basis (4%) points for foreign exchange liabilities held by Turkish banks. It also pledged to provide "all the liquidity banks need".
Isik said the lira's current levels would add between 4 and 5 percentage points to headline inflation in coming months, pushing it up to around 21 percent in September from almost 16 percent last month. Turkish bank regulator BDDK imposed limits on swap transactions, helping the Lira pare some of its losses from its record low and possibly offering relief for European financial institutions.
National Australia Bank global head of currency strategy Ray Attrill said Friday's break below important trend line support in the US73.25¢ to US73.50¢ area was "ominous".
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"This is the sign of a clear attack, a challenge", Albayrak said.
"President Erdogan of Turkey is showing no sign of backing down against the U.S.", said market analyst David Madden at CMC Markets UK, adding the crisis risked having a "knock-on effect" around Europe.
Market analysts broadly welcomed his comments but said investors wanted to see action.
While there is concern that the crisis for the lira could spread to other emerging market currencies, Craig said the drivers of the lira's decline were "very specific to Turkey".
But a drastic rate hike was unlikely because of the damage it would do to Turkey's corporate sector, while any capital controls would close off access to foreign exchange for companies already short of dollars, Tresca said.
Erdogan is ignoring calls to increase interest rates, but economists are warning that if confidence isn't restored quickly, Turkey could lurch into a recession and debt crisis requiring a bailout from the International Monetary Fund.
Erdogan, who has called himself the "enemy of interest rates", wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing.
President Erdogan has said the lira's fall is a result of an "operation against Turkey" against his administration rather than prevailing economic conditions.