Drop in Turkish lira is making us a lot more money

15 Août, 2018, 05:08 | Auteur: Auguste Feret
  • Wall Street dragged down by fall out from Turkey's plunging liraMore

The pastor's imprisonment and then house arrest has caused one of the deepest rows between Turkey and the United States, two North Atlantic Treaty Organisation allies.

"We will impose a boycott on USA electronic products", Turkey's President Recep Tayyip Erdogan said in a televised speech.

This follows tariffs emplaced on Turkish metal exports last week by President Donald Trump which has caused a freefall of the Turkish Lira.

With Turkey's currency crashing, the government's response has been to blame outsiders and double down on a bad economic policy that is only making it worse.

In the case of the American pastor, the lawyer representing Andrew Brunson again asked a Turkish court to release him from house arrest.

U.S. embassy charge d'affaires Jeffrey Hovenier on Tuesday visited Brunson in the western city of Izmir.

The currency has been steadily declining for the past year.

The U.S. responded to the charges by placing sanctions on two ministers and later placing doubling the steel and aluminum tariffs on Turkey; it is these tariffs which are driving concern over Turkey's economy. That helped Turkey's economy, which grew at 7 percent past year.

But now the U.S. Federal Reserve is raising rates.

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While Erdogan didn't address their concerns in his speeches on Tuesday, he suggested Turks have already begun responding to his call to convert foreign exchange into lira because it would be tantamount to "surrendering" if they did otherwise. Turkish economy's body is solid. "The global backdrop has changed and is now less supportive for Turkey, rendering political bluster ever more economically damaging, especially in the context of a heightened Iran-related sanctions from the U.S". Prices are already up 16 percent since previous year, according to the Associated Press.

He has also urged manufacturers not to rush to buy U.S. dollars.

The lira started to stage a recovery on Tuesday following its dramatic two-day collapse. "But there will be a price [which] those who're waging an economic warfare against Turkey will also pay". The fear is of a full-blown emerging market crisis.

Nevertheless, Apple ranks as the second largest smartphone vendor in the country with a 13 percent share, according to Canalys. Other countries have much less exposure. But American companies' direct contact with the Turkish economy is quite limited.

Erdogan was responding to the $716 billion John S. McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA), which prohibits the sale of F-35s to Turkey for 90 days until the Pentagon produces a report on the risks and consequences of Turkey, a member of North Atlantic Treaty Organisation, purchasing the Russian S-400 missile defense system.

But there's no denying the turmoil: The iShares MSCI Turkey ETF (TUR) is down 55% this year.

"We view the policy of sanctions as unlawful and illegitimate, driven mostly by a desire to dominate everywhere and in everything, dictate policies and call shots in worldwide affairs", said Lavrov, predicting "such a policy can't be a basis for normal dialogue and can't last long".

That doesn't mean there are no broader economic risks.

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