As US and Turkey break up, experts warn of risky ramifications

11 August, 2018, 06:21 | Author: Mary Valdez
  • Turkey to reveal 'new economic model' on Friday

US President Donald Trump dramatically increased the pressure on Turkey on Friday, threatening to double tariffs on the country's aluminium and steel exports, leading to a fresh slump in the already tumbling lira.

Trump noted on Twitter that the lira "slides rapidly downward against our very strong Dollar!" Import taxes for aluminum will be 20 percent.

In 2016, when the dollar began to rise, the Grand Bazaar said it had made a decision to accept rent in lira to support the Turkish economy.

The Turkish lira briefly dropped to a record low on Friday, amid concern over the economic policies of President Recep Tayyip Erdogan, as well as the diplomatic row with the U.S.

The Turkish lira fell at least 13 percent Friday, as President Erdogan called for people to exchange their other forms of money to the lira.

A plummeting Turkish lira sent ripples through global equities and emerging markets on Friday, as rising fears of a wider fallout sent investors scurrying for the safety of assets such as the yen and USA government bonds.

Turkey's escalating tensions with the US have exposed long-standing domestic economic problems under Erdogan's stewardship -and the result has been a reckoning in financial markets, particular the Turkish currency.

It fell to a record low this morning, and has now dropped 18 per cent today to 6.5 lira to the dollar, compared with 5.5 lira last night, as a deepening monetary crisis and diplomatic relations with the USA deteriorated.

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European shares and a gauge of global equity markets closed down more than 1 percent, while Wall Street also fell, though not as much. US stocks were also rattled, with banks again in focus.

Meanwhile the cost of insuring exposure to Turkey's sovereign debt through five year credit defaults swaps has spiralled to the highest level since March 2009, topping levels seen for serial defaulter Greece, which has three bailouts in the last decade. 'On some days, I end the day with a loss'.

It was reported that Erdogan's son-in-law and Turkey's new finance minister, Berat Albayrak, were set to unveil a "new economic model" on Friday, but the announcement did little to reassure investors. Overnight it had retreated to its lowest since November 2016 on threats of new USA sanctions, weakening beyond the psychologically important 65-per-dollar threshold. The Turkish currency shed about 17% of its value in a single day.

"We are working with the president, vice president, and the secretary of state as well as members of Congress", the centre's chief counsel, Jay Sekulow, said in a statement.

Turkey has arrested an American pastor and put him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago.

Q: How is the fall in the lira a problem?

"US and Turkey are breaking up", Mr Cook told The National, recommending that Washington instead focuses on "how the tanking of the Lira affects other emerging market currencies, and moving to contain the contagion". The U.S. recently hit two high-ranking Turkish officials with sanctions after the Turkish government refused to release imprisoned Christian pastor Andrew Brunson.

He appeared to blame foreigners for trying to hurt Turkey, saying: "This will be my people's response against those waging an economic war against us".

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