Tuesday, 23 October, 2018

Erdogan calls on Turks to buy lira 'in response to economic war'

Turkey fails to resolve disputes with US Erdogan calls on Turks to buy lira 'in response to economic war'
Nellie Chapman | 11 August, 2018, 06:23

U.S. President Donald Trump ramped up his attack on Turkey by raising steel and aluminium tariffs to 50 percent and 20 percent respectively. Trump said on Twitter.

Investors are now awaiting the release of the US consumer price inflation for July for clues on the interest rate outlook and to gauge if new import tariffs were starting to have an impact. They are also concerned over the central bank's ability to rein in persistent double-digit inflation with the president repeatedly calling for lower rates.

"The United States should know that the only result that such sanctions and pressure will bring... will be harming our relationship as allies", the foreign ministry said in a statement.

Turkey is now under a 25 percent tariff on imported steel and 10 percent on aluminum, which went into effect in March.

Turkey's currency, the Lira, plunged on Friday sparking concerns about the country's financial stability as investors anxious about Turkey's president's economic policies and a dispute with the U.S.

"Those who have dollars, euros or gold under their pillows should go and exchange them into [Turkish] lira".

The lira tumbled 14 per cent in one day, to 6.51 per dollar, a massive move for a currency that will make the Turkish poorer and further erode global investors' confidence in the country.

The currency dropped as much as 18 percent at one point, the biggest one-day fall since Turkey's 2001 financial crisis. The Nasdaq composite was down more than 0.8 percent as technology stocks also dropped. Overnight it had retreated to its lowest since November 2016 on threats of new USA sanctions, weakening beyond the psychologically important 65-per-dollar threshold.

"The situation of Turkey can not go on for much longer - I think they will have to intervene", Cristian Maggio, head of emerging markets strategy at TD Securities, adding that the intervention needed to be "drastic". His comments on interest rates - and his choice of a family member as finance minister - have heightened perceptions that the central bank is not independent.

Paul Greer at Fidelity International said dramatic interventions were now needed as Turkey faced a "downward spiral" of investor confidence. It fell yet further to 6.2 to the dollar at 1254 GMT, almost 12 percent weaker on the day.

Turkey remains at loggerheads with the United States over the detention for the last two years of American pastor Andrew Brunson and a host of other issues. One U.S. dollar traded at 5.96 lira by 2:15 p.m.

Mr Trump intensified his spat with Turkey by imposing the higher tariffs, putting unprecedented economic pressure on a North Atlantic Treaty Organisation ally and deepening turmoil in Turkish financial markets. The currency has lost more than 30% of its value so far this year. In Europe, where exposure to Turkey is far higher, Germany's DAX fell by 1.7% and France's CAC by 1.2%.

Erdogan spoke briefly Thursday night and alluded to problems with the currency, saying "various campaigns" were underway, adding: "If they have dollars, we have our people, our righteousness and our God".

The lira has always been falling on worries about Erdogan's influence over monetary policy and worsening relations with the US.

Turkey's new economic perspective was unveiled on Friday by the state's top economic official, Treasury and Finance Minister Berat Albayrak.