The lira has lost more than 35 percent of its value against the US dollar this year, prompting concerns that Turkey's economy, which is heavily reliant on foreign currency loans, could affect other emerging markets.
Though still weak, the currency picked up against the dollar on Wednesday after Qatar pledged investment in Turkey following talks with President Recep Tayyip Erdogan in Ankara.
Here are six things you need to know about the crisis:
What's happening to the Turkish lira?
The Turkish lira stood at around 5.84 against the US dollar on Friday, two days after Qatar announced a $15bn investment into the country's financial markets and banks.
Earlier this week, the currency was at a record low of 7.24 against the US dollar.
While all of this has happened, inflation has reached 15.6 percent, increasing the cost of everyday items.
What's behind the crisis?
The crisis began days after US President Donald Trump announced via Twitter a doubling of steel and aluminium tariffs on Turkey, as Washington pushed Ankara to release Evangelical Christian pastor Andrew Brunson, who is being held on terrorism charges.
On Wednesday, Turkey doubled tariffs on some imports from the US - such as passenger cars, alcohol and tobacco.
President Erdogan has blamed the lira's fall on an "operation against Turkey" rather than prevailing economic conditions, calling it "deliberate attacks".
Analysts agree, saying the dispute with the US has contributed to the lira's plunge.
Soner Cagaptay, the director of Turkish research programme at the Washington Institute, said the US had an "arsenal of economic sanctions" ready to deploy against Turkey, which he believed Trump would escalate until Brunson is released.
"Such a move will further feed Erdogan's narrative that 'the West is attacking us'."
Aly-Khan Satchu, a financial analyst and CEO of Rich Management, a financial and political advisory firm, said the "US dollar has been weaponised - either deliberately or by design".
"What we're seeing is the reduction of dollars being supplied into the system and the end of quantitative easing," he told Al Jazeera in an interview from the Kenyan capital, Nairobi.
"When the global markets were flooded with cheap and free dollars, everybody got terribly excited, particularly across emerging and frontier markets, and now we have seen a whiplash turn here," Satchu added.
What does this mean for Turks?
According to economic experts, in the short term, the lira's slide will increase inflation, which will hurt Turkey's poor.
The Financial Times reported on July 27: "The Turkish bakers’ federation on Thursday announced a 15 percent increase in bread prices. The cost of an iPhone is up by a quarter."
Businesses are also concerned about higher import prices.
In June, Charles Robertson, chief global economist at Renaissance Capital, said that economic growth will be slow, "at best two to three percent this year. And the population is growing [at the rate of] one to two [percent], so per capita, that's really not much of a gain."
"These are tough times for Turks now," he told Al Jazeera's Counting the Cost programme.
However, it is worth noting that in 2001, a year before Erdogan became prime minister, Turkey's inflation rate was at 69 percent. On Thursday, it stood at 15.6 percent.
What steps have been taken?
The Turkish government has taken several measures over the last few days to stem the crisis.
On Monday, the central bank vowed to provide banks with "all the liquidity they need", and the industry ministry announced the activation of $1.2bn for the Turkish industrial production.
Al Jazeera's Sinem Koseoglu, reporting from Istanbul, said the government would find it "impossible" to raise interest rates to combat inflation.
Erdogan has instead called on Turks to sell their dollars and euros to shore up the national currency.
"One of the steps that is demanded by the international markets is the hike of the interest rates by the Turkish central bank, but according to the school of thought that President Erdogan and his economic team represent, this is impossible for Turkey," Koseoglu said.
"They see it as a pressure by the international market and foreign powers on Turkey and they wouldn’t bow down."
On Wednesday, Qatar Emir Sheikh Tamim bin Hamad Al Thani announced the $15bn investment into the country's financial markets and banks, citing Turkey's decision to "stand with the issues of the Muslim World".
Berat Albayrak, the finance minister, will address investors in a conference call to ease concerns at 13:00 GMT on Thursday.
How are international markets reacting?
The weakness of the Turkish currency is starting to affect other emerging market economies.
On Monday, the Indian rupee hitting a fresh record low of 70.33 rupees to $1 on Thursday.
"A falling rupee helps exports - things like textiles and IT [information technology] services. But it puts up the price of India's imports, particularly oil, which in turn leads to inflationary pressure and widens India's trade deficit," said Al Jazeera's Andrew Thomas, reporting from the northeastern city of Guwahati.
The South African rand has also taken a hit.
Satchu, the financial analyst, believes the falling lira is just one factor hurting emerging markets, along with the reduction of the dollar supply.
"The repricing in Turkey has spilled over into other markets," he said.
What's expected to happen now?
Analysts have raised concerns of a wider contagion spreading through global markets.
Satchu said that Turkey would have to raise its interest rate by 750 points to bring the "situation under control".
"It's a losing battle ... we are looking at a precipice right now," he told Al Jazeera. "If he [Erdogan] refuses to raise the interest rates, the only thing that can give is the Turkish lira.
"We are looking at a scenario where the currency totally collapses, the inflation takes off and Turks will be wandering around with wheelbarrows of lira trying to buy a loaf of bread."
He added that the "dollar is basically knee-capping countries", before warning that others could be affected "if they continue to pursue the policies that Erdogan is seeking to pursue".
