Economy

Euro, emerging market currencies fall on Turkey's economic woes

Euro, emerging market currencies fall on Turkey's economic woes

Turkey has so far refused to comply, prompting Trump on Friday to double the tariffs on U.S. imports of Turkish steel and aluminium, causing the lira to plunge.

The threat to the lira, the stock market and the economy has drawn a sharp reaction from Erdogan, who has promised to look for new economic friends, including among traditional U.S. adversaries.

As the lira plunged another seven percent in value, investors fretted over potential economic contagion from Turkey, particularly to European banks. Shares in Europe's major banks also fell.

The Turkish lira has lost about 40 percent this year alone, largely over worries about Erdogan's influence over the economy, his repeated calls for lower interest rates in the face of high inflation and deteriorating ties with the United States.

Turkey's troubles also dampened USA stock markets, driving losses in all three major indexes by Monday afternoon. "If you come at us with your dollars then we will find other ways to do business".

Turkey and the U.S. are in jeopardy, Turkish President Recep Tayyip Erdogan said, warning the White House he would turn to "new allies" if the United States continues to show a "lack of respect" for his country.

"We will not surrender", Erdogan asserted.

"The people and the Government of Pakistan reiterate their strong support for the Government and the people of Turkey in their quest for peace and prosperity, and as always, will continue to stand by them towards the achievement of these shared goals", the Foreign Office said.

The Turkish currency lost nearly 20 per cent of its value against the U.S. dollar last week and is down 40 per cent since the start of the year.

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Relations between the countries soured after Trump threatened to impose sanctions on Turkey over terror-linked American Pastor Andrew Craig Brunson, who was arrested in the Aegean province of Izmir in December 2016. What possible reason could there be behind the lira which was at 2.8 against dollar in July 15, 2016 to slide below 6 yesterday? Albayrak, who is Erdogan's son-in-law, didn't provide much in the way of details.

In its first statement since what was dubbed "Black Friday" in Turkey, the central bank said it was ready to take "all necessary measures" to ensure financial stability, promising to provide banks with "all the liquidity" they need.

The dollar, which has rallied since the lira crisis, was little changed.

"Immediately give these to the banks and convert to Turkish lira and by doing this, we fight this war of independence and the future", he said.

The central bank surprised markets last month when it left interest rates unchanged despite double-digit inflation and the tumbling lira.

But a drastic rate hike was unlikely because of the damage it would do to Turkey's corporate sector, while capital controls would close off access to foreign exchange for companies already short of dollars, Tresca said.

Erdogan had on Saturday described interest rates as a "tool of exploitation", in remarks that further unnerved markets.

Turkish authorities said Monday that they were investigating 346 social media accounts that they accused of provoking the wild movements in the currency, according to the state news agency. Stocks .XU100 dropped 4 percent, with the BIST blue-chip index down around 50 percent in dollar terms this year.

Turkey's plight has raised fears of more casualties.


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