Earlier, it had crashed some 12 per cent through the 6.00 level for the first time in history, trading at one point at more than 6.20 lira per dollar.
The lira plunged to as low as 6 against the United States dollar on Friday, a day after a Turkish delegation returned from talks in Washington with no apparent solutions to their simmering crisis.
Versus the euro on Friday the lira lost 7.0 per cent to trade at 6.8.
The two governments are at odds over the detention in Turkey of US evangelical pastor Andrew Brunson on terror charges, raising investors' concerns. Turkish President Recep Tayyip Erdogan has described attempts to exert economic pressure on his country, including by means of destabilizing its financial system, as futile, Anadolu news agency reported on Friday.
"If you have dollars, euros or gold under your pillow, go to banks to exchange them for Turkish lira".
He warned a "rate hike alone might not stem the worries about the USA and Turkey tensions and a potential further escalation".More news: God Of War’s Massive New Game Plus Mode Is Coming This Month
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Erdogan wants banks to lend cheap credit to fuel growth. Erdogan said China, Mexico, Russia and India will be new markets for his country's exports. Raising the rates has been heavily opposed by Erdogan.
Shares in France's BNP Paribas (BNPP.PA), Italy's UniCredit (CRDI.MI) and Spain's BBVA (BBVA.MC), the banks seen as most exposed to Turkey, fell as much as 4 percent. "Now all of a sudden a currency crisis in Turkey could trigger another dimension to their own financial problems".
"Don't heed them. Don't forget, if they have their dollars, we have our people, our God".
Turkey will adopt a new economic approach under its executive presidency, one that will be decisive, sustainable and based on a "strategic mentality", Treasury and Finance Minister Berat Albayrak said on Friday.
The plunge in the lira has featured remarkably little on Turkish television channels and newspapers - most of which after recent ownership changes are loyal to the government - with most media focusing instead on recent flooding by the Black Sea.