Fresh sanctions threat from U.S. knocks recovery of Turkish lira

Saul Bowman
August 19, 2018

Turkey's lira fell once again after the trade minister, Ruhsar Pekcan, said Friday that her government would respond to any new trade duties, which U.S. President Donald Trump threatened in an overnight tweet.

Qatar's benevolent act comes at a dire time for Turkey's economy, with the Turkish lira reaching record lows in the last few days as a result of a feud with the US.

Turkey's banking watchdog has taken steps to stabilise the currency, limiting futures transactions for offshore investors and lowering limits on swap transactions.

Calling once again for Turkey to release Pastor Andrew Brunson Friday, President Donald Trump had harsh words for the North Atlantic Treaty Organisation ally before leaving the White House Friday for Southhampton, New York.

"They are now holding our wonderful Christian pastor, who I must now ask to represent our Country as a great patriot hostage". "They have invested a lot of pressure into the release of Brunson, given the importance of the midterm elections in the US".

Ankara accuses Mr Brunson - who operates a tiny evangelical church in Izmir - of having links to the outlawed Kurdistan Workers Party and the Gulenist movement, which Turkey blames for a failed coup two years ago.

Finance Minister Berat Albayrak, the son-in-law of President Recep Tayyip Erdogan, addressed hundreds of foreign investors from the United States, Europe and Asia via a conference call in a bid to soothe the markets.

As Turkey retaliates against the United States in their ongoing dispute over the detention of an American pastor, Ankara is mending ties with the European Union in an attempt to limit the damage to its economy, analysts told The Media Line.

"Turkey has been a problem for a long time".

The Qatari emir said that beyond financial calculations, his country's primary motivation was to "stand by our brothers in Turkey", a hint at the nascent but apparently strong strategic alliance between the two Muslim countries.

"Working with you, we have more that we're planning to do if they don't release him quickly", Mnuchin told the president.

Trump on Thursday tweeted: "Turkey has taken advantage of the United States for many years".

A Turkish court refused to release Brunson, and the government in Ankara raised tariffs on a range of US goods-cars, alcohol, and tobacco. Its leader lives in Pennsylvania and the US has rejected calls from Turkey to have him extradited. This brought its decline for the year to about 40 per cent.

The lira rose as he spoke. But the sell-off has increased the cost of servicing that debt, particularly for companies whose revenues are exclusively in lira.

Economists say Turkey's central bank needs to raise interest rates significantly to strengthen its currency.

Turkey is also seemingly on the brink of a major debt crisis, as a weakening lira makes it harder for Ankara to pay its global dues.

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