Asian markets tumble and Turkish lira dives amid contagion fears

13 August, 2018, 08:41 | Author: Wade Massey

Our relations with Turkey are not good at this time!'

On Sunday, speaking to supporters in Trabzon on the Black Sea coast, Erdogan dismissed suggestions that Turkey was in a financial crisis like those seen in Asia two decades ago.

Overnight it fell to a new record low of 7.2362 to the dollar before recovering to around 6.8222 in early Asian trading, similar to its trading price on Friday.

"It's still the case that the euro and Australian dollar are most readily in the firing line, given concerns over euro zone exposure to Turkey and the Aussie's status as the market's preferred EM/risk proxy", NAB's Attrill said of the impact of the falling lira on Group-of-10 currencies.

During Sunday's meeting, President Recep Tayyip Erdoğan also said that the fluctuation in the Turkish lira is a plot against Turkey, but the Turkish people will not give in.

The currency has lost more than 45 per cent of its value this year, largely over worries about Erdogan's influence over the economy, his repeated calls for lower interest rates in the face of high inflation and worsening ties with the United States. "What is the reason for all this storm in a tea cup?"

The Trump administration threatened to impose additional sanctions on Turkey if it did not meet the deadline, Erdogan said. There is no economic reason for this.

Erdogan said Turkey would turn towards new markets, new partners and alternative financial tools.

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In the Hurriyet interview, Albayrak said budget policies were important to support and strengthen the central bank's monetary policies.

Erdogan also hit back at United States authorities for convicting Mehmet Hakan Atilla, 47, deputy director general of Turkish lender Halkbank on charges of helping Iran evade U.S. sanctions on billions of dollars of oil proceeds.

He added that businesses should "know that keeping this nation alive and standing isn't just our job, but also the job of industrialists, of merchants".

The lira's crash was sparked by a disagreement with the United States over the detention of an American pastor in Turkey, which has even brought up questions over the future partnership between Washington and Ankara.

The currency is currently down 13.5% against the USA dollar, after a brief 20% fall, resulting from a Trump tweet that declared, "Aluminum will now be 20% and Steel 50%", and concluded: "Our relations with Turkey are not good at this time!"

Erdogan appeared to indicate that the entire alliance between Turkey - which joined North Atlantic Treaty Organisation in 1952 with strong American backing - and Washington was at stake.

Since then, its relationship with Turkey, the sixth largest steel importer to the USA, the world's biggest steel importer overall, has deteriorated, prompting Ankara to send a delegation this week to Washington to meet with both the State and Treasury Departments.

"President Erdogan's strengthened powers under the new presidential system have made it increasingly uncertain whether policymakers will be able to act to stabilize the economy", William Jackson, the chief emerging markets economist at Capital Economics in London, said.

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