Published: Mon, August 13, 2018

Turkey pledges lira action to calm markets

Turkey pledges lira action to calm markets

We look the issue straining relations between the U.S. and Turkey.

Speaking hours after Iran, also under United States sanctions, offered Turkey its support, Mr Erdogan told a crowd in the Black Sea city of Trabzon that U.S. sanctions were part of an "economic war" against the country.

Turkey's currency dropped some 16 percent to new record lows against the dollar on Friday.

In addition, foreign investors are disquieted by Erdogan's authoritarian government, which seems to be pursuing imprudent and politically charged economic policies which undercut the independence of the central bank - only worsening Turkey's economic predicament.

Earlier, Erdogan had stood by his opposition to high interest rates, saying they were an instrument of exploitation and that Turkey was not going to fall into this trap. I am addressing the USA once again: it is a pity that you chose a pastor over your strategic partner in North Atlantic Treaty Organisation.

Mr. Erdogan, who has called himself the "enemy of interest rates", wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing.

His comments on interest rates - and his recent appointment of his son-in-law as finance minister - have heightened perceptions that the central bank is not independent. "What is the reason for all this storm in a tea cup?"

"Repeated efforts to communicate to the US administration that none of the stated criteria driving America's tariffs are applicable to Turkey have thus far proven fruitless", Trade Minister Ruhsar Pekcan said in a statement. Erdogan said. "There is no economic reason for this".

Turkey said the tariffs were against the rules of the World Trade Organisation (WTO).

Mr Erdogan also hit back at United States authorities for convicting Mehmet Hakan Atilla, 47, deputy director general of Turkish lender Halkbank, on charges of helping Iran evade U.S. sanctions on billions of dollars of oil proceeds.

Bloomberg price data showed the dollar climbed as much as 13 per cent to 7.2362 against the lira, with some banks said to avoid providing two-way prices amid unprecedented volatility.

"The last time I can remember a currency exploding into a similar acceleration of weakness to what we have seen in the past 24 hours is the Russian ruble crisis that transpired late in 2014", Jameel Ahmad, the head of currency strategy at FXTM, said.

He added that businesses should "know that keeping this nation alive and standing isn't just our job, but also the job of industrialists, of merchants".

Relations between the US and Turkey have deteriorated further this week as US President Donald Trump raised tariffs against Turkish aluminium to 20% and to 50% in terms of steel. Even if Washington and Ankara can resolve their immediate problems - such as the recent arrest of USA citizens in Turkey - the numerous, and multiplying, issues on which Turkey and the United States now disagree could be their relationship's undoing.

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