Lira plummeting further into crisis ensures a brutal conclusion to eventful week

Galtero Lara
Agosto 11, 2018

It had been billed as a state visit that would patch up frayed ties between two North Atlantic Treaty Organisation allies and potentially serve as a platform for Turkey to make overtures toward Europe after months of strained relations.

U.S. President Donald Trump said Friday he had authorized the doubling of steel and aluminum tariffs with respect to Turkey, as tensions mount between the two North Atlantic Treaty Organisation allies.

Turkish President Recep Tayyip Erdoğan struck a defiant note in a series of Twitter messages shortly before Trump's announcement.

It added: "We will continue to support our iron, steel and aluminium exporters by defending their interests against illegal practices of other countries on every global platform, especially WTO".

The president has declared that American importers' reliance on foreign metals poses a national security risk to the United States, and he also has increased the cost of these imports on Japan, Turkey and members of the European Union, the paper reported.

Exacerbating the problems: a diplomatic standoff with the United States over the fate of a captive American missionary who Turkey has accused of espionage.

Turkish President Tayyip Erdogan has remained defiant despite the lira being in free fall.

Erdogan framed Turkey's currency crisis as a "national battle" against economic enemies, namely the USA, saying "if they have their dollar, we have the people, we have Allah".

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Turkey's financial crisis and further US pressure spurred more concern among investors as fears appeared to spread to American markets.

The diplomatic tension and the failure of Turkish officials to persuade the USA to lift the sanctions plunged the lira to new lows this week. U.S. President Donald Trump introduced a round of sanctions on August 1, preventing the Turkish justice an interior ministries from doing business with U.S. businesses.

"This will be the response to those who have declared an economic war", he said, blaming Turkey's woes on what he described as an "interest rate lobby" seeking to push the country to higher rates.

"This is a national, domestic battle".

Turkey, a North Atlantic Treaty Organisation ally, him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago. "While they have dollars, we have our people, law and Allah", the Turkish leader said addressing citizens in the Black Sea city of Rize.

They are also concerned over the central bank's ability to rein in persistent double-digit inflation with the president repeatedly calling for lower rates.

New Finance Minister Berat Albayrak - Erdogan's son-in-law - acknowledged that the central bank's independence was critical for the economy, promising stronger budget discipline and a priority on structural reforms.

The lira is now down 36% this year and bond yields have sky-rocketed. Hard currency debt issued by Turkish banks suffered similar falls. At one point, it was down as much as 19 percent on the day, before rallying a bit to bring it to "only" a 13.7 percent loss.

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