Falling lira pushes Turkey towards uncharted territory

Falling lira pushes Turkey towards uncharted territory

Falling lira pushes Turkey towards uncharted territory

Turkey vowed retaliation "without delay" and warned the move would further harm relations between the two allies.

Compounding the lira's agony, President Donald Trump said he had doubled steel and aluminium tariffs on Turkey, noting that relations between the North Atlantic Treaty Organisation allies were "not very good". The lira slid to a fresh record low against the USA dollar.

"As he stated, the president has authorized the preparation of documents to raise tariffs on imports of steel and aluminum from Turkey", White House Deputy Press Secretary Lindsay Walters said.

Turkey has had this sort of experience - a disastrous currency collapse shrinking its economy and impoverishing its citizens - several times before, most recently in February 2001.

The lira has always been falling on worries about Erdogan's influence over monetary policy and worsening relations with the US.

Turkey exported $1.04 billion (€0.91 billion) worth of steel and $60 billion worth of aluminum to the United States in 2017, according to the Hurriyet newspaper.

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TURKS have been hitting bureau de changes, after being ordered to sell their gold and dollars to support the crumbling Lira.

Turkey's currency, the lira, has hit record lows, creating a headache for the country's president and pushing up prices on everyday items. The lowest exchange rate is 6.64 against the greenback set on Friday.

Ivo Daalder, a former USA ambassador to North Atlantic Treaty Organisation and now president of the Chicago Council on Global Affairs think-tank, said Turkey could grind decision-making at Nato's headquarters in Brussels to a halt if the dispute with Trump got out of hand.

Turkish President Recep Tayyip Erdogan won another term in office in June with expanded powers.

Markets are deeply concerned over the direction of domestic economic policy under Erdogan with inflation at almost 16 percent but the central bank reluctant to raise rates in response.

It had already fallen more than 40% in the past year.

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Trump last month threatened to slap "large sanctions" on Turkey if it did not release American pastor Andrew Brunson, who faces charges of espionage for allegedly supporting a failed coup attempt in 2016.

A statement from the Kremlin said the two leaders discussed economic and trade ties. Inflation increased 16 percent in July, and Erdogan has insisted that interest rates not increase. The first is Turkey needs to borrow a lot of money from overseas; the second is the Federal Reserve's rate hikes have made holding money in the United States attractive enough that it is hard for Turkey to get what it needs without sweetening the pot for investors by raising rates itself; and the third is, as a result of all its past borrowing, Turkey has foreign currency debts equal to 30 percent of its economy.

Secondly, Turkey has a huge problem with spiralling inflation, which now stands at 16pc year-on-year by official estimates even before the latest episode of Lira weakness.

"I'm not aware of any prior administration using tariffs in this way, and there's a very simple reason: because they're an incredibly blunt instrument that often can have blowback on American workers and consumers as we've seen in the China context", said Ned Price, a former Central Intelligence Agency officer who also served as a National Security Council spokesman during the Obama administration. Turkey answered the March tariff announcement by placing its own tariffs on $267 million of US goods.

The defiant tone and war rhetoric only hurt the lira more, before Erdogan's finance chief and son-in-law, Berat Albayrak, tried to ease investor concerns during a conference, saying the government would safeguard the independence of the central bank.

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