Turkey Says US Waging ‘Economic War,’ Lira Weakens
The lira slid on Thursday after Turkey accused the United States of waging “economic war” amid a bitter standoff between the NATO allies over the fate of a Christian pastor detained by Ankara.
Turkish President Recep Tayyip Erdogan’s spokesman said Washington must respect the legal process concerning the pastor, Andrew Brunson, whose trial in Turkey on terrorism charges has infuriated US President Donald Trump.
The lira dipped as far as 6.1350 against the dollar and was 0.7% weaker on the day at 6.0785 at 1200 GMT. The dollar was boosted by US Federal Reserve minutes indicating it would raise interest rates in September.
The lira is down 37% this year, with the crisis in Turkish-US ties exacerbating losses prompted by concerns about Erdogan’s influence on monetary policy. He says interest rates are the “mother and father of all evil” and opposes hiking them.
Economists said Turkey had still to convince investors it was ready to take measures needed to shore up its economy.
“The problems of Turkey are not fixed,” said Cristian Maggio, head of emerging markets strategy at TD Securities. “There is not one single structural solution or reform that has been advanced or detailed by the local authorities.”
Maggio added that lira volatility had increased due to thin trading volumes as Turkish markets are closed all week for the Muslim festival of Eid al-Adha.
Erdogan’s spokesman, Ibrahim Kalin, told Reuters overnight that comments by Trump’s national security adviser showed the United States was targeting Turkey’s economy.
John Bolton told Reuters that Turkey had made a “big mistake” in not freeing Brunson, and was skeptical about $15 billion of investment support from Qatar, saying it was “utterly insufficient to have an impact on Turkey’s economy.”
“(Bolton’s) statement is proof that the Trump administration is targeting a NATO ally as part of an economic war,” Kalin said.
“The Trump administration has … established that it intends to use trade, tariffs and sanctions to start a global trade war.”
‘Restrictive and punitive’
Until Kalin’s statement, Turkish officials had been silent about comments on Turkey this week by Trump and Bolton. Trump told Reuters on Monday he would make no concessions to Ankara in return for Brunson’s release.
Brunson, who has lived in Turkey for two decades, has been detained for 21 months and is now under house arrest. He denies the charges against him.
Trump, who counts evangelical Christians among his core voter base, has doubled tariffs on metal imports from Turkey, prompting Ankara to raise tariffs on US car, alcohol, and tobacco imports by the same amount.
Ankara has also initiated a WTO dispute complaint on the tariffs.
“Turkey will protect its national interests on every platform and work with the rest of the world against restrictive and punitive measures,” Kalin said, adding that Qatar’s support had a positive impact on markets.
“The steps we have taken to prevent an assault on the Turkish lira yielded positive results” and the Finance Ministry and other institutions will continue to “take precautions and protect our economy,” Kalin added.
A German government source said the International Monetary Fund could help Turkey weather its currency crisis, but Finance Minister Berat Albayrak, Erdogan’s son-in-law, has said Ankara has no plans to go to the IMF.
Cemil Ertem, Erdogan’s chief economic adviser, reinforced that message on Thursday, saying Turkey must deepen economic and trade ties with the European Union and other countries.
“Let alone the IMF, not one crumb of the IMF mentality must come through our door after this. If it does then we will face a real collapse and crisis,” Ertem wrote in Milliyet newspaper, describing the “attack” on Turkey’s economy as a “fantastic opportunity” for all emerging economies.
The analyst Maggio highlighted market concerns that Turkey’s central bank has not been hiking interest rates despite double-digit inflation and the ailing lira.
“They just squeezed liquidity out of the market but now they have started to reduce that squeeze, which is removing the support the lira received,” said Maggio. “I would be very surprised to see a sustained rally in the lira.”
In his comments to Reuters, Kalin also said Mehmet Hakan Atilla, a banker at Turkey’s state-owned Halkbank, had been unjustly convicted in the United States for taking part in a scheme to help Iran evade US sanctions. Atilla was sentenced to 32 months in jail in May.
“It is unacceptable that certain baseless and false allegations are made against Halkbank to weaken this public bank,” Kalin added.
“Turkey is extremely frustrated with this process.”