Published: Sat, August 11, 2018
Money | By Michele Stevens

Turkey's lira crisis explained

Turkey's lira crisis explained

A diplomatic tussle between the United States and its North Atlantic Treaty Organisation ally deepened Friday after President Donald Trump said he had authorized the doubling of tariffs on Turkish steel and aluminum.

Turkey says doubled tariffs on Turkish steel and aluminium announced by US President Donald Trump are against the rules of the World Trade Organisation (WTO).

The currency slid almost 8 percent in relation to the dollar to a record low of 6.59 shortly after Trump announced the increase on metals duties on Twitter.

'Aluminum will now be 20 percent and Steel 50 percent.

President Donald Trump announced tariff increases on Turkish metals as tensions between Turkey and the United States escalated.

The lira has always been falling on worries about Mr Erdogan's influence over monetary policy and worsening relations with the United States.

The Trump administration's original move in March to raise tariffs on most steel and aluminum imports was proposed to safeguard U.S. jobs against overseas rivals.

Turkey's currency, the Lira, plunged on Friday sparking concerns about the country's financial stability as investors anxious about Turkey's president's economic policies and a dispute with the U.S.

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"Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks".

On Friday, Mr Erdogan also held a telephone call with Russian President Vladimir Putin, with the pair discussing economic ties between their two countries.

The meetings came as Turkey seeks to stanch an economic meltdown amid fallout from US sanctions imposed last week over the continued detention of the pastor, Andrew Brunson, who was jailed on espionage and terrorism suspicions more than two years ago and recently released to house arrest.

Mr Erdogan also remained defiant, as he urged the Turkish people to exchange foreign currency or gold for lira.

While Turkey and the United States are at odds over a host of issues, the most pressing disagreement has been about the fate of American Christian pastor Andrew Brunson, who is on trial on terrorism charges for allegedly supporting a group that Ankara blames for the failed coup.

Turkey and the United States are now experiencing rocky relations following Washington's imposition of sanctions on Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul for not releasing Brunson.

Stocks sold off around the world, with US equities erasing what would've been a sixth weekly gain as Turkey's economic crisis deepened.

The trouble is that for all of Albayrak's talk of Central Bank independence, Erdogan is fiercely opposed to any interest rate hikes, which are widely seen as necessary to stem the bleeding.

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Shares of Turkish steelmakers Kardemir Karabuk Demir Celik Sanayi ve Ticaret AS and Eregli Demir ve Celik Fabrikalari TAS plunged as much as 8 per cent and 9.9 per cent, respectively, after Trump's tweet.

The Turkish lira hit an all-time low against the dollar on Friday, and there are growing concerns that the country's economic troubles could spread to the eurozone.

This year, it lost more than 40 per cent.

Solving Turkey's tensions with the U.S. would also likely go some way to quell nerves.

He also urged Trump to recognize the 1915 Turkish slaughter and exile of 1.5 million Armenians as a genocide, which US presidents have declined to do for decades.

The lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.96, down more than 7 per cent on the day. Furthermore, consternation in the U.S. Congress has led to a nascent bill that could limit Turkey's ability to obtain loans from any U.S. -based financial institutions.

The central bank raised interest rates to support the lira in an emergency move in May, but it did not tighten at its last meeting.

"I have full confidence in this government, I'm sure it will find a way out and reverse the trend", said Erdogan supporter Sabahattin.

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