Turkish Lira Plummets; Erdogan Pledges Economic War

Turkish Lira Plummets; Erdogan Pledges Economic War

The situation was compounded on Friday when US President Donald Trump tweeted that he had authorised a doubling of tariffs on steel and aluminium.

The increase in tariffs is considered a blow to the value of Turkey's lira, which reportedly fell further after the president's announcement.

Concerns were intensified on Friday by a report in the Financial Times that the supervisory wing of the European Central Bank had over the past week begun to look more closely at eurozone lenders' exposure to Turkey.

"Aluminum will now be 20% and Steel 50%".

Ankara's rocky relations with Washington took a further hit as President Donald Trump lobbed fresh salvoes via Twitter against Turkey, plunging the sagging Turkish lira to new lows against the dollar.

On Friday, Erdogan asked Turkish citizens to sell off their gold and dollars and exchange them for the lira, in an attempt to prop up the currency.

Turkey's escalating tensions with the USA have exposed long-standing domestic economic problems under Erdogan's stewardship -and the result has been a reckoning in financial markets, particular the Turkish currency.

The currency dropped as much as 18 percent at one point, the biggest one-day fall since a 2001 financial crisis in Turkey.

United States investors shifted focus from strong corporate earnings to the rout in Europe, sending the major stock-market indexes lower.

The tweet is another salvo in the growing dispute between Turkey and the U.S.

"The situation of Turkey can not go on for much longer - I think they will have to intervene", Cristian Maggio, head of emerging markets strategy at TD Securities, adding that the intervention needed to be "drastic". The predictable result is this has made inflation get out of control - it is up to 15.9 percent when they are supposedly trying to keep it to 5 percent - because the central bank has been so slow to raise rates, and, in fact, refused to do so at its most recent meeting.

"Our relations with Turkey are not good at this time!" he added.

A United States official, speaking on condition of anonymity, told The National that the tariffs decision was among a number of options presented to Mr Trump.

There was some relief for the Turkish Lira later in the day, however, after Turkish Finance Minister, Berat Albayrak, announced a raft of measures aimed at reassuring markets about the country's financial resilience.

Erdogan spoke briefly Thursday night and alluded to problems with the currency, saying "various campaigns" were underway, adding: "If they have dollars, we have our people, our righteousness and our God".

The lira's slide came after a USA delegation from Washington, D.C., left Turkey without making progress toward the release of Andrew Brunson, an American pastor detained by Erdoğan's government since 2016.

Erdogan on Friday appealed for calm and called on people to change foreign money into local lira. A delegation of Turkish officials held talks with their counterparts in Washington this week but there was no sign of a breakthrough.

The lira has lost more than 40 percent this year.

In June, the U.S. Senate passed a bill prohibiting Turkey from buying F-35 fighter jets because of Brunson's imprisonment and Turkey's purchase of Russia's S-400 air defense system.

Hordijk said in an email: "President Erdogan is the elephant in the room ..."