Markets

Fall of the Turkish Lira raises concerns for emerging markets

Fall of the Turkish Lira raises concerns for emerging markets

Turkey's central bank said on August 13 that it would provide liquidity and cut reserve requirements for Turkish banks to stop the slide in its currency.

Relations with Washington worsened further Friday when Trump tweeted that he had authorized a 20 percent duty on aluminium and 50 percent duty on steel. Lindsay Graham of SC, said Trump's decision was retaliation against Turkey for not releasing Brunson. Only 4 percent of U.S. steel imports came from Turkey in the first half of 2018, with the volume dropping nearly 50 percent from 2017, according to data from the Office of the U.S. Trade Representative.

On Friday, the Turkish currency plunged to another record low amid concerns over Erdogan's unorthodox economic policies and a diplomatic row with the United States that has led to sanctions.

USA experts say President Donald Trump's tweet on Friday stating that he has authorized doubling the tariff on steel and aluminum imports from Turkey will further destabilize the Turkish economy and put ties between the two countries in a "real dilemma".

Trump aggravated an already dire situation in Turkey in a tweet Friday saying that he had authorized the doubling of steel and aluminum tariffs "with respect to Turkey".

Waves from the crisis spread overseas, with investors selling off shares in European banks which have large exposure to the Turkish economy.

Earlier this month, the Office of the US Trade Representative announced a review of the eligibility of Turkey to participate in the Generalized System of Preferences (GSP) programme based on concerns related to its compliance with the GSP market access criterion. But those talks on Thursday showed no signs of breakthrough.

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Even before Trump's announcement, President Tayyip Erdogan told Turks to exchange gold and dollars for lira in order to fight "an economic war".

"Nevertheless, we implore President Trump to return to the negotiating table - this can and should be resolved through dialogue and cooperation", he added. "This is a domestic and national struggle".

"We will give our response to the person - who declares war against the whole world including our country - by turning towards new markets, new partners and new alliances", Erdogan added.

The nominally independent central bank has defied pressure over the last few weeks to hike interest rates in the face of high inflation and a collapsing currency.

Photo American Christian pastor Andrew Brunson is on trial in Turkey on terrorism charges.

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.

President Erdogan has railed against what he calls the economic siege of Turkey and against a supposed American conspiracy.