The lira touched an all-time low of 4.0665 to the US dollar before recovering slightly to trade at 4.0610 at 0710 GMT. It also touched a record low of 4.9758 against the euro.
The Hurriyet newspaper reported that, on Erdogan's orders, work was continuing on a package of measures to lower interest rates and tax cuts could also come onto the agenda. It did not specify sources for the report, which Reuters was not immediately able to confirm.
With inflation running in double digits, investors have been unsettled by Erdogan's repeated insistence that interest rates should be brought down to sustain economic growth.
"At the moment we can't completely understand what the government is aiming for in the economy. There is confusion," said one senior banker who declined to be named because of the sensitivity of the issue.
"In short, the market is watching what is happening with concern and this is having an impact on pricing," the banker added.
The yield on the benchmark 10-year bond jumped to 13.26 percent from a last trade of 13.12 percent on Thursday. The main BIST 100 share index dipped 0.26 percent to 114,670 points.
Doubts emerged on Thursday about the future of Deputy Prime Minister Mehmet Simsek, in charge of the economic management team, but he said he would work to serve the people until his "last breath" and Prime Minister Binali Yildirim said he was still in his post and a cabinet reshuffle was not on the agenda.
Hurriyet said the planned package to bring down interest rates would involve the active use of a single Treasury account to ease its borrowing efforts and resources amounting to some 40 billion lira ($9.9 billion) would be made available for this account.
Simsek referred to such a move in February, saying it would increase the effectiveness of state cash management and create a powerful cash reserve.
Dealers said the lira was also under pressure due to falling risk appetite after US President Donald Trump proposed tariffs on more Chinese products, aggravating trade tensions, while the dollar steadied before the closely watched US non-farm payrolls report.