Published: Fri, August 10, 2018
Business | By Tara Barton

Trump doubles steel and aluminium tariffs on Turkey as lira nosedives

Trump doubles steel and aluminium tariffs on Turkey as lira nosedives

Turkey's embattled lira on Friday hit new record lows against the U.S. dollar, losing some five percent in value as fears grew over the exposure of European banks and tensions with the United States showed no sign of easing as Washington piled more pressure on Ankara through sanctions after a meeting between a Turkish delegation and USA officials in Washington yielded no apparent solution to a diplomatic rift over the detention in Turkey of an evangelical American pastor.

'I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar!' Trump said in an early morning post on Twitter. Berenberg economist Carsten Hesse estimates that a fall of eurozone exports to Turkey of 20 percent would subtract no more than 0.1 percentage point from economic growth.

Turkish President Recep Tayyip Erdogan is appealing for calm as the country's currency plunges, urging people to change foreign money into local lira.

Treasury and Finance Minister Berat Albayrak - who is Erdogan's son-in-law - was scheduled later on Friday to outline a 'new economic model'.

Erdogan reportedly was defiant, telling worshipers after Friday prayers that Turkey "will not lose the economic war".

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

'This is a national, domestic battle. "Hopefully we will overcome this disaster and we will also successfully overcome this economic war", Erdogan said.

The lira fell further as Erdogan spoke.

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"The dollar can not block our path".

Reuters Turkey's president, Recep Tayyip Erdogan, listens during a news conference with British Prime Minister Theresa May in London, U.K., May 15, 2018.

The Canadian dollar weakened to a more-than two-week low against its USA counterpart as geopolitical risk rattled global financial markets, offsetting stronger-than-expected domestic jobs data.

More evidence that emerging currencies were having a bad day came from Russian Federation, where the ruble dived again on Friday and is now down five percent since the United States on Wednesday hit Russian Federation with new sanctions over its alleged involvement in a nerve agent attack in Britain. As the currency drops, Turkish companies and households with debt in foreign currencies see their debts expand. Shares of European lenders also dropped, hit by concern about their Turkish exposure.

The dollar index, which measures the greenback's strength against a group of six major currencies, breached the 96 level, taking it to its highest level since July 2017.

Markets are anxious about a deepening fallout between Washington and Ankara over the detention of United States pastor Andrew Brunson on terror charges, as well as other issues. A delegation of Turkish officials held talks with their counterparts in Washington this week but there was no sign of a breakthrough.

"It is astonishing that no matter how punished the Lira looks, traders are showing absolutely no indication that they are finished with pricing in "bad news" into the market", Jameel Ahmad, the head of currency strategy and market research at FXTM, said.

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