Published: Sun, August 12, 2018
Worldwide | By Myra Stephens

Turkey ready for trade with partners, including Russian Federation, in national currencies - Erdogan

Turkey ready for trade with partners, including Russian Federation, in national currencies - Erdogan

Speaking after U.S. President Donald Trump doubled tariffs on Turkish steel and aluminium imports, Erdogan described Friday's 18 percent fall in the lira to a record low as the "missiles" of an economic war waged against Turkey.

President Trump and Turkish President Recep Tayyip Erdogan appear in the Roosevelt Room of the White House on May 16, 2017.

A new bout of selling Friday on increased strains with the U.S. forced the lira over six against the U.S. dollar for the first time, with the currency at one point shredding a quarter of its value in a single day.

Earlier on Friday the lira plunged as much as 14 percent on as worries about Erdogan's influence over monetary policy and worsening US relations snowballed into a market panic that also hit shares of European banks. (The last substantial hike was in January 2018; before then, it was in late 2013, when Turkey was dealing with the end of the U.S. Federal Reserve's quantitative easing program.) The country could also place controls on capital, but those can hamper private sector activity and won't be easy considering the government's relative inability to totally control private capital.

This year, it lost more than 40 per cent.

The new tariffs announced on Friday come as the United States increases pressure for the release of American pastor Andrew Brunson, who has been in Turkish custody since 2016 on charges of espionage.

By Saturday, the lira was trading at 6.43 to the dollar. "Our relations with Turkey are not good at this time!" he noted on Twitter.

He said: 'There is definitely contagion from Turkey across emerging markets. Financial upheaval risks further destabilizing an already volatile region.

Turkey's ever combative President Recep Tayyip Erdogan vowed to not bow to economic pressure.

Aluminium will now be 20 per cent and Steel 50 per cent.

"Section 232 tariffs are imposed on imports from particular countries whose exports threaten to impair national security as defined in Section 232, independent of negotiations on trade or any other matter".

But Turkey's trade ministry said the tariffs were against World Trade Organisation rules. He denies the charges.

Turkish officials held talks in Washington this week but there was no breakthrough.

The plunge in the Turkish lira could not have come at a worse time.

The tensions with Washington have, for investors, underscored Turkey's authoritarian trajectory under Erdogan.

"Those who have dollars, euros or gold under their pillows should go and exchange them into [Turkish] lira". In his speech in the northeastern city of Bayburt, Erdogan added that he would decisively defend the country against economic attacks.

The Turkish president took aim at the United States in his address, claiming "some countries have engaged in behaviour that protects coup plotters and knows no laws or justice".

In an opinion piece in the New York Times, he warned the USA that Ankara had other alternatives as allies.

"Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies", he added.

A Turkish man waits to change his US dollars with Turkish liras inside a currency exchange shop in Ankara, Aug. 10, 2018.

The currency turbulence coincides with the most bitter dispute with the United States since the 1974 Turkish invasion of Cyprus, which so far shows no sign of abating.

It said it would support steel and aluminium exporters on all worldwide platforms, and the USA remained an important trade partner.

"With EMEA a source of geopolitical risk, we think it will be hard for the ZAR to also stabilise - in effect the Rand's source of market risk has shifted from a weaker CNY to a weaker TRY and RUB", says foreign exchange strategist Viraj Patel with ING Bank N.V.

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