Turkish crisis weakens shekel against dollar

President Tayyip Erdogan addresses his supporters in Bayburt Turkey on Aug. 10 2018. The Associated Press

Exotix Capital, a specialist emerging market investment bank, said in an email on Monday: "International investors would like to see the same actions taken in Argentina recently: much higher interest rates (e.g. a more than 10 percentage point hike), a commitment to address inflation and improve fiscal performance, and engagement with multilateral lenders such as the IMF".

Erdogan indicated he was in no mood to offer concessions to the United States in one of the worst spats between the two North Atlantic Treaty Organisation allies in years.

In a statement the White House clarified that Trump had authorized the preparation of documents to raise steel and aluminum tariffs through his authority under Section 232 of US trade law.

Details and implementation of the plan remained vague.

"This is the sign of a clear attack, a challenge", Albayrak said.

Turkey's central bank, perhaps under the influence of a president who has declared himself an "enemy" of higher interest rates, is yet to raise interest rates in response to the crisis.

In an interview with the newspaper Hurriyet, Treasury and Finance Minister Berat Albayrak also said the government had no plans to seize foreign currency deposits or convert deposits to the Turkish lira.

The Turkish lira plummeted over the weekend, hitting a record low of 7.06 lira to the dollar in early Asian trade.

Yet the dollar was still up nearly 10 percent on the day at 7.0000 lira.

Turkish President Recep Tayyip Erdogan, embroiled in a bitter dispute with the US, a North Atlantic Treaty Organisation ally, contended Sunday the plunging value of his country's lira currency amounted to a "political plot" against Turkey.

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In his speech, Erdogan, referring to industrialists, said, "Do not prefer to rush to banks and buy foreign currency".

The lira's plunge sparked tremors through global markets on Monday, dragging a gauge for emerging-market currencies to the lowest in more than a year.

Spanish banks have $83.3 billion in exposure to Turkish markets, while French banks are owed $38.4 billion and Italian banks owed $17 billion.

However, experts paint a bleaker picture, warning that global markets may face major ramifications as investors try to assess the impact of the crisis on European banks that have lent money to Turkey.

Turkish President Recep Tayyip Erdogan lashed out against the United States on Monday, criticizing that the North Atlantic Treaty Organisation ally seeks to "stab Turkey in the back" by the use of sanctions. "All of our action plan and measures are ready", Albayrak said, without elaborating.

Presidential Communications Director Fahrettin Altun described the rumors as "disinformation campaign" based on a statement by President Recep Tayyip Erdoğan, who had said on August 12 that "You must know that keeping this nation on its feet is not just our duty but also the duty of industrialists and merchants".

For the Pound, there are no material stats scheduled for release through the day, with the current geo-political storm having a relatively muted impact, the Pound having already been beaten into submission over Brexit and fears of a hard exit from the European Union that is about to have its hands full should Turkey collapse into a financial crisis and begin defaulting on government paper. "With God's permission we will overcome this", Erdogan told his party members in the Black Sea city of Trabzon.

Raising interest rates was a "tool of exploitation" against business, he said.

"President Erdogan of Turkey is showing no sign of backing down against the United States", said market analyst David Madden at CMC Markets UK, adding the crisis risked having a "knock-on effect" around Europe.

On Sunday, Germany's Economy Minister Peter Altmaier criticized the US sanctions against Turkey.

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