Erdoğan urges Turks to sell dollars and euros to support lira

Clay Curtis
August 11, 2018

In the first three months of 2018, Turkish steel exports to the United States fell almost 50 percent over the same period in 2017, making it the only top-10 source of US steel imports to see a decrease, according to the US Commerce Department.

On Friday, President Trump doubled tariffs on Turkish metal imports, largely the result of Turkey's terrorism trial of a U.S. evangelical pastor whose freedom Washington is demanding.

The drop in the lira has put increasing pressure on Turkish banks, given many companies have borrowed heavily in foreign currency.

The Turkish lira hit a record low on Friday before Mr Trump's tweet, which also said "our relations with Turkey are not good at this time!".

USA dollar and Euro notes are seen in this November 7, 2016 picture illustration.

Turkish President Recep Tayyip Erdogan spoke before the nation twice on August 10, but the country's currency continued its descent, reaching about 6.4 lire per dollar, a decline of about 14.6 percent.

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".

The dollar rose as exposure to Turkey could impact European banks and spark a domino effect throughout Europe as people begin to pull out of those banks and into the US, said Gregan Anderson, macroeconomic strategist at brokerage Bulltick LLC.

Turkey's currency sank to record lows on Friday amid panic about the country's economic health and souring relations with the United States.

Tribune Withdraws From Sinclair Merger Amid Scrutiny Over Deal
The owner of WGN-Ch.9 and dozens of other television stations, Tribune Media remains an acquisition target. In addition, Tribune said , Sinclair outright refused to sell station in some markets.

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 U.S. deteriorated. The Eurozone is particularly exposed - the European Central Bank is anxious about non-hedged exposure of European banks to Turkish companies and if Turkish banks fail, there's no question that it will affect markets around the world. For China, stabilizing a fellow emerging economy's currency has value, but Beijing could also benefit from becoming an economic friend to a North Atlantic Treaty Organisation state whose relationship with the West is increasingly strained.

Turkish President Recep Tayyip Erdogan won another term in office in June with expanded powers. The lack of central-bank action to support the currency is also spooking investors and Erdogan's previous comment that interest rates are the "mother and father of all evil" hasn't helped.

Erdogan added that Washington had always "failed to understand and respect the Turkish people's concerns". In the latter's case, investors fear that Europe's banks could sustain large losses if Turkey is forced to default on its debts.

"The Turks can export to many other countries, but with a weak lira, their products become cheaper to buy". Erdogan's speech caused the value of the lira to drop even further.

While the lira's plunge could drag down the Turkish economy, the impact on euro zone banks in general is seen as modest, economists said.

"Do not worry!" He said Turkey was not afraid of "threats" and added Turkey had "alternatives" for economic cooperation in many places "from Iran, to Russian Federation, to China and some European countries".

Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.

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.

Other reports by

Discuss This Article