Markets rattled as Turkish lira dives to record lows

Virginia Carson
August 14, 2018

USA stocks rose in a broad rally on Tuesday after four straight days of losses on a strong set of earnings from retailers and as bank stocks rebounded after the Turkish lira snapped a three-week slide.

A pledge by Turkey's central bank to stabilise the plummeting lira failed to calm investors' nerves.

"They do not refrain from using the economy as a weapon against us, as they tried in the areas of diplomacy, military, or efforts for social and political instability", Erdogan said.

CURRENCIES: Turkey's currency fell another 8 percent on Monday, bringing its losses this year to 46 percent.

Investors are anxious not only about Turkey's souring relations with the US, a longtime North Atlantic Treaty Organisation ally, but also Erdogan's economic policies and the country's high debt accumulated in foreign currencies.

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Foreign Minister Mevlut Cavusoglu said Monday that the United States would not achieve aims by exerting pressure and imposing sanctions on Turkey.

President Recep Tayyip Erdogan on Tuesday said Turkey would boycott United States electronic goods like the iPhone in retaliation for punitive sanctions from Washington, as the Turkish lira finally clawed back some ground after going into a tailspin over the tensions.

The retreat of the dollar comes one day after the CBRT moved "to support financial stability and sustain the effective functioning of markets", introducing measures on the Turkish lira and the foreign exchange market (FX) liquidity management.

"We, as the Turkish Airlines, stand by our state and our people". "What do you want to do?"

Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.

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Brunson is at the center of a diplomatic spat between North Atlantic Treaty Organisation allies Turkey and the United States, which has helped trigger a Turkish currency crisis. The news comes just two weeks after Brunson was released from prison into house arrest, although a Turkish court rejected his appeal to be released from house arrest.

In the interview with Hurriyet newspaper, Albayrak described the lira's weakness as "an attack" - echoing Erdogan, who is his father-in-law.

Erdogan has said that he thinks the lira would stabilize, but investors are not convinced. "I believe in my nation", Erdogan vowed, the New York Times reported.

In a joint statement Tuesday, Turkish business groups called on the government to institute tighter monetary policy in order to combat the currency crisis.

In the United States, new record highs for Apple Inc and Amazon.com Inc were not enough to outweigh declines in financial companies that are the most likely to be affected by the steep decline in the lira. The White House said the newly imposed sanctions would take effect from Aug 13.

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Trump doubled tariffs on Turkish steel and aluminum imports last week, contributing to a meltdown in the lira that threatens Turkey's banking sector and has rattled global markets.

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