Turkish lira weakens to 5.86, US warns of more sanctions

Virginia Carson
August 17, 2018

Erdogan has called on Turks to exchange their dollars for lira in order to shore up the domestic currency.

"But the rise in Italian bond yields amid the country's fiscal concerns may continue indefinitely and limit the bounce by the euro", said Masafumi Yamamoto, chief forex strategist at Mizuho Securities. "We are not expecting any fines on Halkbank for sure", he said.

Qatar has promised to make a Dollars 15 billion direct investment in Turkey, badly hit by a currency crisis amid a widening diplomatic standoff with the United States, officials said.

Trump prefaced Mnuchin's remarks by saying that Turkey had not been a very good friend to America.

Washington has already placed a series of sanctions against Turkey, including last week's announcement of a doubling of tariffs on metal imports into the USA from Turkey.

Turkey vowed it would not succumb to threats.

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Turkey retaliated with some $533 million of tariffs on some US imports - including cars, tobacco and alcoholic drinks - and said it would boycott USA electronic goods, singling out iPhones.

Why this tension between North Atlantic Treaty Organisation allies?

French President Emmanuel Macron (L) meets Turkish President Tayyip Erdogan (R) in New York, US on September 19, 2017.

Both countries have been engaged in a trade war, ostensibly over Brunson.

The US insists the pastor, a long-time Turkish resident, is "a victim of unfair and unjust detention".

In a tweet on Thursday, Trump hailed Brunson as a "great patriot hostage" lashing at Turkey for "holding our wonderful Christian pastor".

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The influential Protestant evangelical church in the USA is a major support base for Mr Trump. Erdogan feels it's because of recent United States sanctions. Ankara also wanted Washington to hand over Turkish cleric Fethullah Gulen, who lives in Pennsylvania and who Turkey suspects of plotting the coup against Mr Erdogan.

USA support for Kurdish rebel groups fighting Islamic State fighters in northern Syria is another major difficulty, given Turkey's battle against a Kurdish insurgency in its own country.

MSCI's benchmark emerging stocks index ended the week on a slightly calmer note, up 0.2%, and snapping a seven-day losing streak on tentative optimism that US-Sino relations may improve with the scheduling of the first trade talks since June.

Could the lira crisis spread?

The Turkish currency was trading at 5.85 at 1740 GMT, more than 1 percent stronger on the day.

The lira's collapse has plunged the entirety of the emerging market space into chaos, with contagion causing the likes of the South African rand, the Argentine peso, and the Indonesian rupiah, to slump in response.

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