Turkish lira steady despite new threats from Trump

17 August, 2018, 16:44 | Author: Salvatore Jensen
  • US tariffs to remain even if pastor freed WH

Efforts to rally support and bolster domestic markets included a call Thursday between Turkish Finance Minister Berat Albayrak and worldwide investors.

The lira has staged a small recovery but that is threatened by a fresh tweet from US President Donald Trump.

China's Foreign Ministry said Turkey can "overcome" the economic problems.

China isn't the only country the U.S. has a rocky relationship with - Turkey is causing a few headaches for United States leaders as well.

"They are squeezing lira liquidity out of the system now and pushing interest rates higher", Cristian Maggio, head of emerging markets strategy at TD Securities, said.

If it were all USA -dollar-denominated, that foreign debt represented about two trillion lira a month ago; today, thanks to depreciation, it's more like three trillion.

President Donald Trump doubled tariffs on Turkish metals exports to the United States last week prompting Turkey, which says it will not bow to threats, to raise tariffs on USA cars, alcohol and tobacco by the same amount on Wednesday. Turkey's sovereign dollar bonds extended their gains.

All the while, the lira has plummeted - even reaching a record low against the USA dollar early Monday before managing modest rallies in the following days.

Investors have been pulling out of Turkey's markets, sending its stock market and currency plunging. Ratings agency S&P Global Ratings is also scheduled to release a review of Turkey's sovereign credit rating after the market closes on Friday. The banks were capable of managing the volatility, and there had been no major flow of cash out of deposits lately, he added. But his father-in-law's opposition to higher interest rates may complicate that quest. "He said capital controls weren't part of the agenda, and never will be".

Economists gave Albayrak's presentation a qualified welcome and the lira initially found some support, helped by Qatar's pledge to invest $15 billion (£11.8 billion) in Turkey. "This is regrettable and a step in the wrong direction".

Mr Erdogan responded on Tuesday by announcing that his country will boycott US-made electronic goods such as iPhones and will buy Korean Samsung or Turkish-made Vestel instead.




The spokesman also confirmed that Scholz had invited Albayrak for talks to Berlin in the second half of September.

He asked Mnuchin for an update on sanctions punishing Turkey for pastor Andrew Brunson's detention.

That case has increased speculation that the bank itself could be fined for sanctions-busting. "We are not expecting any fines on Halkbank for sure", he said. So what Trump did was undermine confidence in Turkey when it needed it most, and effectively helped to push the lira down even further.

Last week, the United States doubled its tariffs on metal imports from Turkey.

He later tweeted that the Protestant clergyman, who has been detained since 2016 when he was arrested in a government crackdown following a failed coup bid, was a "great patriot" being held "hostage".

The two North Atlantic Treaty Organisation allies are at an impasse regarding the detention of an American pastor, differing views on Syria, and Turkey's purchase of Russian military equipment.

The lira had nosedived in recent weeks, hitting a record low of 7.24 this week, as investors anxious about fundamental economic problems in the country and a diplomatic and trade dispute with the United States.

However, Turks appeared not to be heeding his appeal.

Despite that, foreign currency deposits held by local investors rose to $159.9 billion (£125.8 billion) in the week to August 10, from $158.6 billion (£124.8 billion) a week earlier, central bank data showed on Thursday.

United States gold futures were down 1.1 per cent at $1,172.7 an ounce.

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