Published: Fri, August 10, 2018
Economy | By

Erdogan says attempts to exert economic pressure on Turkey futile

Erdogan says attempts to exert economic pressure on Turkey futile

The lira went into free-fall, sinking more than 12 percent at one point to reach and all-time low, having now lost more than one third of its value this year against the United States dollar and the euro.

Meanwhile, concerns were intensified on August 10 by a report in the Financial Times that the supervisory wing of the European Central Bank (ECB) had over the last weeks began to look more closely at eurozone lenders' exposure to Turkey.

"The rand and other EM currencies on the back foot as sentiment sours", Rand Merchant Bank analysts said in a note, adding that this was due to "geopolitical concerns and the negative impact of the US-China trade spat on global growth".

The lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.94, down 7 percent on the day.

Meanwhile, Turkish Treasury and Finance Minister Berat Albayrak is expected to present a new economic development doctrine for the country on Friday.

TRY now comes under pressure once again after the press conference by President Erdogan is failing to ignite some interest around the currency, all amidst a "radio silence" from the Turkish central bank (CBRT).

"In most cases though, we suspect that this resilience will prove temporary", they said, highlighting expectations of rising USA interest rates and worries over growing USA protectionism.

"Know this: We are better than yesterday, we will be even better tomorrow".

"President Erdogan's strengthened powers under the new presidential system have made it increasingly uncertain whether policymakers will be able to act to stabilise the economy", said William Jackson, chief emerging markets economist at Capital Economics in London. "Selling more elsewhere would offset some of the hypothetical decline in eurozone exports to Turkey".

Obviously a real Turkish crisis would have knock-on effects, though Berenberg sees Europe's exposure to Turkish banks as being too small to cause much harm.

"Many of these European banks have their own non-performing loans and liquidity issues to deal with themselves".

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