Why has Turkey's currency fallen so sharply?

A Kuwaiti man holds a one US dollar bill next to a five Turkish lira banknote at a currency exchange

"The fluctuation in the Turkish Lira is a plot against Turkey, but the Turkish people will not give in", the Turkish president defiantly said on Sunday in a live speech in northwestern province of Trabzon, sharply criticizing the United States of waging an "economic war" against his country.

In an interview with Hurriyet newspaper published online, Albayrak described the lira's weakness as "an attack", echoing President Tayyip Erdogan - who is his father-in-law - but he said Turkey's action plan was ready. He also took higher interest rates off the table and said Turkey wouldn't accept an worldwide bailout.

In response, President Trump doubled tariffs on aluminium and steel imports from Turkey, deepening the currency's losses and raising concerns that the crisis could weigh on other economies.

TRT World's Rahul Radhakrishnan has more.

Turkey's Capital Markets Board (SPK) and financial crime board have also said they would take legal steps against those who spread misinformation about financial institutions and firms, or reports that the government would seize foreign-currency deposits. Some investors have called for the benchmark rate of 17.75 per cent to be jacked up by 1000 basis points.

TRT World's Andrew Hopkins speaks from the conference in Ankara.

"Turkey is under siege in the economy, as in other areas".

"I have respect for our president, but I can't sell my gold and foreign currency just because he made that call", said Mr Sevin Temur, a 58-year-old retiree.

"We expect the U.S. to be faithful to our traditional friendly relations and North Atlantic Treaty Organisation alliance", Mevlut Cavusoglu said in his opening speech at the 10th Ambassadors' Conference in the capital Ankara.

Calling the Turkish foreign policy as "multi-directional" and "multi-dimensional", Cavusoglu said the country's embassies play active roles in "enhancing economic, commercial and cultural relations, especially in the defense industry". These flows, some of which are highly mobile and short term, also expose Turkey to sudden stops and reversals when worldwide investors fear the worst.

Stocks close lower amid Turkish currency crisis
BBVA is the most exposed, followed by UCG, ING, BNPP and HSBC , whose share price was down 0.8 per cent in afternoon trading. The lira slipped below 7.0 to the U.S. dollar and was down 12 percent on Friday's value at one point this morning.

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Turkish lira crisis gets worse with fresh 11% plunge
It confirmed that Kuwait's Finance Minister Nayef Al-Hajraf met with Albayrak at Kuwait International Airport on Sunday evening. In contrast, the Turkish economy grew by 7.4 percent a year ago - quicker than financial growth champions China and India.

Turkey's currency fell to a new record low today.

Erdogan appeared unworried by the punitive measures imposed by the U.S., saying Turkey could turn to other partners and again terming the crisis an "economic war".

He added that Turkey would continue its "constructive engagement".

As President Recep Tayyip Erdogan lashed out at the United States, took higher rates off the table and said he wouldn't accept an global bailout, traders pushed down Turkish assets in a selloff that spilled over to other developing economies. "You are exchanging your strategic partner in North Atlantic Treaty Organisation for a priest".

Relations between the United States and Turkey had plunged to their lowest in decades following unprecedented sanctions declared by the United States on Turkey over US pastor Andrew Brunson, who faces terrorism charges and up to 35 years in prison if found guilty.

USA pastor Andrew Craig Brunson is at the centre of a diplomatic row between Turkey and the US.

Brunson is also accused of spying for political and military ends.

They fell 15 per cent yesterday at DP Eurasia, the outfit bringing Domino's delights to Turkey; a drop now totting up to 40 per cent-plus this month.

Why are Turkey and the USA at odds?

Also caught up in the sell-off is Russia's ruble, which today hit its lowest level against the United States dollar since April 2016 and its lowest level against the euro since April this year, partly reflecting the high amount of borrowing in foreign currencies by Russian corporates, but also concern about the damage that the latest round of U.S. sanctions against Moscow - imposed in the wake of the Salisbury poisonings - will do to the country's economy.


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