The unit recovered somewhat after Turkey's central bank announced a raft of measures aimed at calming markets. "We have Vestel." It was unclear how Erdogan meant to enforce the boycott.
Relations between North Atlantic Treaty Organisation allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara's plan to buy Russian defence systems and the detention of an American pastor, Andrew Brunson.
But the dispute was sparked by a dispute over the detention of American pastor Andrew Brunson, who was jailed almost two years ago in the crackdown that followed a failed military coup in Turkey.
The value of the Turkish lira fell by another 10 percent on Monday as markets in Asia, Europe and the U.S. declined on fears that contagion from Turkey's crisis would spread to other emerging market economies as well as to European banks holding billions of dollars' worth of Turkish debt.
"U.S. banks' total claims on Turkey amounted to just $38 [billion] at the end of March this year, not much more than claims on Finland", Pantheon's chief economist, Ian Shepherdson, wrote in a note.
USA support for Kurdish rebel groups fighting Islamic State (IS) fighters in northern Syria is another major difficulty, given Turkey's battle against a Kurdish insurgency in its own country. That creates an awkward triangle, given that Turkey is a Nato member, Russian Federation is NATO's number one threat and the organisation is obliged to defend any member that is attacked.
Relations between the countries soured after Trump threatened to impose sanctions on Turkey over American Pastor Andrew Craig Brunson, who was arrested in the Aegean province of Izmir in December 2016.
Across emerging markets, the Turkish lira is bringing others down with it. Investment in factories and other fixed assets grew 5.5 percent in the first seven months of the year, down from 5.7 percent in the year to June. That makes the currency drop so much more painful as it will increase the cost of servicing debt for Turkish companies and banks and could lead to bankruptcies.
More than a third of Turkish banks' lending is in foreign currencies, according to Reuters.
Investors have pulled back money from emerging markets in recent months as the US Federal Reserve has steadily raised interest rates and is cutting back on easy money policies in response to a robust American economy.
The diplomatic dispute has sent shockwaves through financial markets across the world as the plunging lira causing currencies in other developing countries to nosedive. Even more, Trump's direct reference to the Turkish lira sent the currency tumbling. He has used his new power to put pressure on the central bank to not raise rates.
It's not clear how Erdogan would enforce the boycott, the AP noted.
"Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates".
The currency was supported by news of a planned conference call in which the finance minister would seek to reassure investors concerned by Erdogan's control of the economy.