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Turkey's Erdogan Vows Action Against 'Economic Terrorists' Over Lira Plunge

14 August, 2018, 22:46 | Author: Lawrence Cooper
  • The lira plunged to a fresh record low of 7.24 against the dollar during in Asia Pacific trade where markets were opening for Monday morning. Ismail Ferdous  Bloomberg

On Friday the slide turned into a crash where the lira dropped as much as 18 percent, hitting United States and European stocks as investors took fright over banks' exposure to Turkey.

The Turkish lira TRYTOM=D3 recovered some ground after plunging to an all-time low on Monday as the country's central bank took steps to ease pressure on the currency.

Showing no signs of backing down in a standoff with the U.S., Erdogan suggested that Turkey would stop procuring U.S. -made iPhones and buy Korean Samsung or Turkish-made Vestel instead.

The lira recovered after Turkey's central bank moved to ease pressure on the currency, triggering a surge of as much as 7 percent to 6.4 per US dollar.

Erdogan also said the country is under an economic "siege" that has nothing to do with its economic indicators, insisting that Turkey will overcome the "attack" on its economy.

Turkey was also suffering from significant economic problems of late.

Erdogan said Turkey would boycott USA electronic products.

The retreat of the dollar comes one day after the CBRT moved "to support financial stability and sustain the effective functioning of markets", introducing measures on the Turkish lira and the foreign exchange market (FX) liquidity management. "And have no doubt that today, we stand before the dollar, the exchange rate, the inflation and interest rates". Their rush for the exit is worsening the currency's drop, which is likely to lead to bankruptcies in Turkey as banks and companies with loans in foreign currencies go bust.

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"What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain - but without it there's just no credibility of promises to restabilize things", said Craig Botham, Emerging Markets Economist at Schroders.

Against the US dollar, the euro touched its lowest since July 2017 at $1.13715.

Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.

The business groups also urged diplomatic efforts with the United States and an improvement in relations with the European Union, which is Turkey's major trading partner. But independent analysts say higher rates are needed urgently to stabilize the currency and Erdogan's hard line is one of the reasons investors are worrying. "I believe the new and important topics will be discussed in this call, otherwise there would not be such an attempt".

Erdogan has so far rejected such analyses, saying the United States is the main culprit.

Brunson's lawyer, Ismail Cem Halavurt, said the court had up to seven days to decide. The White House said the newly imposed sanctions would take effect from Aug 13.

Fears over US sanctions and tariffs on Turkey have had a global ripple effect, sending the Russian ruble, the Argentinian peso and the South African rand down along with it.

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