Why the Collapse of the Turkish Lira Matters

Why the Collapse of the Turkish Lira Matters

Why the Collapse of the Turkish Lira Matters

The lira fell as low as 6.75 to the dollar, down a whopping 14 percent on the day and 41 percent since the start of the year as investors worry about the country's economic policies and a dispute with the United States that has led to sanctions and new tariffs.

The Turkish lira plunged on Friday, raising questions about the country's financial stability, as investors anxious about the president's unorthodox economic policies and a dispute with the United States that has led to sanctions.

Donald Trump has today announced massive increases to tariffs against Turkey as its currency the lira continues to plummet.

President Trump said Friday the US will double tariffs on steel and aluminum for Turkey, noting the relationship between the two states "are not good at this time!". As recently as April the ratio was about four lira per dollar.

While the diplomatic fight between Turkey and the United States was widely cited as the trigger for the meltdown in the value of the lira, a Financial Times report suggests that the European Central Bank is concerned about some of the region's banks' exposure to Turkey, adding a new twist to the Turkish story.

Turkey remains at loggerheads with the U.S. in one of the worst spats between two North Atlantic Treaty Organisation allies in years over the detention of American pastor Andrew Brunson and a host of other issues.

Reverberations spread through global markets, with European stockmarkets especially hit as investors took fright over banks' exposure to Turkey.

"If you have dollars, euros or gold under your pillow, go to banks to exchange them for Turkish lira".

"This is a domestic and national struggle", Erdoğan said, according to The Associated Press.


The Turkish lira hit a record low on August 10 after President Donald Trump authorized the doubling of tariffs on imports of Turkey's steel and aluminum.

Erdogan called on Turks to not be concerned about exchange rate movements, mockingly declaring "the dollar, the mollar will not cut our path".

However, a defiant Erdogan brushed aside concerns, telling a roaring crowd of Turks in the Black Sea city of Rize not to worry.

That is unlikely to mollify investors who are also anxious by the growing dispute with the United States.

A Turkish delegation met with officials from the departments of State and Treasury earlier this week as both sides sought a way out of the rising tensions. It is obvious how it will be done: "since the final decision-maker of all policies in the new regime is the president, the responsibility of regaining confidence is on his shoulders".

The lira stood 5.75 against the dollar on Friday morning.

Trump commented on the issue as the Turkish lira has fallen 36 percent in 2018, and the country faces increasing debt without foreign investment.

Treasury and Finance Minister Berat Albayrak has vowed to execute Turkey's new economic model together with "all national and global stakeholders", while stressing that a "decisive" approach and the Central Bank's independence would be maintained.

On Friday, they also had to also factor in Turkey's economic crisis.

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