Wednesday, 23 January, 2019

Why Turkey’s currency is plunging and what it means

Nellie Chapman | 11 August, 2018, 11:29

US President Donald Trump is doubling tariffs imposed on Turkish steel and aluminum, insisting that the relationship between the two countries is 'not good'.

Turkey is world's sixth-biggest steel producer, and eighth largest steel importer for the U.S. according to the International Trade Administration.

That turned into a rout on Friday, with the currency diving as much as 18 per cent at one point, the biggest one-day drop since a 2001 financial crisis in Turkey.

On Friday, the euro sagged to a 13-month low against the dollar, down 0.7 per cent to $1.1450, after the Financial Times reported that the European Central Bank was anxious about possible losses at eurozone banks operating in Turkey.

Relations are also tense because of new U.S.

The lira has now lost over a third of its value against both the dollar and the euro this year, with the currency battered by both concerns over domestic economic policy and the political situation.

In his tweet about the new tariffs, Trump said "Our relations with Turkey are not good at this time!".

Financial upheaval there risks further destabilising an already volatile region.

"In this process, we will finely work every single detail as a wide spectrum including all national and global stakeholders", he said in the first part of his speech, referring to Turkey's Medium-Term Economic Plan (OVP), which will soon be renamed.

The new duties on Turkey are double the level Mr Trump imposed in March on steel and aluminium imports from a range of countries.

"Some countries have engaged in behaviour that protects coup plotters and knows no laws or justice", he said. Gultekin hopes that some sort of compromise between Turkey and the United States can be reached, enabling Erdogan to have an "honourable exit" and come up with a substitute for the International Monetary Fund stabilisation programmes of previous crises. Aluminum will now be 20% and Steel 50%.

Turkey's President Recep Tayyip Erdogan addresses his supporters in Bayburt, Turkey, Friday, Aug. 10, 2018. It pegged its total credit exposure to Turkey at $2.53 billion at the end of June, nearly entirely with non-sovereign counterparties or borrowers, and said it had $2.05 billion of Turkish collateral.

"My guess is you're going to get people cutting estimates, if we get bad volatility here on the capital markets front", said Charles Peabody, a bank analyst at Portales Partners.

President TrumpDonald John TrumpKobach agrees to recuse himself from vote counting in Kansas GOP primary NFL players kneel during national anthem before first preseason game Schiff blasts GOP for Russian Federation probe conduct: "That's how you obstruct an investigation, not how you conduct one" MORE said Friday that the USA will also double tariffs on steel and aluminum imported from Turkey as relations between the North Atlantic Treaty Organisation allies worsen.

Adding to investors' concerns, Erdogan pledged a continuation of his debt-fueled construction policy to boost the economy, which is blamed for Turkey's rampant inflation and has added to currency weakness.

The diplomatic dispute with the United States was one of the triggers for the turmoil this week. Gulen has denied the allegation.

But the immediate trigger is North Carolina pastor Andrew Brunson, who has been detained in Turkey's Aegean province of Izmir since October 2016 on thinly supported espionage and terror charges. Graham called Turkey's case against Brunson a "sham". He offered no further details.

Erdogan today called on Turks to support their struggling currency.