Turkey's turmoil rocks world markets
The lira fell as much as 18 percent against the dollar in its worst day since Turkey’s financial crisis of 2001. It followed a deepening rift with the United States, worries about its own economy and lack of action from policymakers.
Bank shares across Europe fell and the euro slipped to its lowest since July 2017 as the Financial Times quoted sources as saying the European Central Bank was concerned about European lenders’ exposure to Turkey.
Investors piled into “safe” government debt, with German yields hitting three-week lows and the yield on the benchmark U.S. 10-year Treasury note falling to 2.88822 percent.
The safe-haven Japanese yen hit a one-month high of 113.38 against the dollar.
The dollar index, which measures the greenback’s strength against a group of six major currencies, breached 96, taking it to its highest level since July 2017. It was last up 0.7 percent at 96.173.
Turkish President, Tayyip Erdogan told Turks to exchange gold and dollars into lira as the currency tumbled. The currency has fallen more than 40 percent this year, fanning worries about a full-blown economic crisis.
Trump intensified his spat with Ankara with the higher tariffs, putting unprecedented economic pressure on a Nato ally and deepening the financial turmoil.
Criticizing the state of the U.S. relationship with Ankara, Trump announced on Twitter that he had authorized a doubling of duties on aluminium and steel, making them 20 percent and 50 percent respectively.
I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!— Donald J. Trump (@realDonaldTrump) August 10, 2018
Trump said in an early morning post on Twitter.
Erdogan’s defiance in the face of the crisis has further unnerved investors. The president, who says a shadowy “interest rate lobby” and Western credit ratings agencies are attempting to bring down Turkey’s economy, appealed to Turks’ patriotism.
If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks. This is a national, domestic battle, he told a crowd in the northeastern city of Bayburt. This will be my people’s response to those who have waged an economic war against us.
The dollar cannot block our path. Don’t worry, Erdogan assured the crowd.
That is unlikely to mollify investors who are also worried by the growing dispute with the United States.
The US, the world’s biggest steel importer, imposed tariffs of 25 percent on steel and 10 percent on aluminium in March for imports from a variety of countries.
Since then, its relationship with Turkey, the sixth-largest steel importer to the US, has deteriorated, prompting Ankara to send a delegation this week to Washington to meet with both the State and Treasury Departments. But those talks on Thursday showed no signs of breakthrough.
Last week, the US imposed sanctions on Turkey’s justice minister and interior minister for not releasing American pastor Andrew Brunson.
Brunson, an evangelical Presbyterian pastor from North Carolina, was jailed for allegedly supporting a group that Ankara blames for an attempted coup in 2016. Brunson denies the charge.
Posts
