Tuesday, 20 November, 2018

Turkish finance chief tries to reassure investors on crisis

The lira plunged to a fresh record low of 7.24 against the dollar during in Asia Pacific trade where markets were opening for Monday morning. Ismail Ferdous  Bloomberg Damage to Euro from Lira Crisis has its Limits: CBA
| 17 August, 2018, 15:39

Last week, a Turkish delegation returned from Washington with no movement on the detention of American pastor Andrew Brunson, who is under house arrest in Turkey over terrorism charges.

US Treasury secretary Steven Mnuchin assured president Donald Trump at a Cabinet meeting that sanctions were ready to be put in place if Mr Brunson was not freed.

Turkish President Recep Tayyip Erdogan says his country will boycott US -made electronic goods amid a diplomatic spat that has helped trigger a Turkish currency crisis.

"The worst of the broader contagion fears is likely behind us, and we do not expect further knock-on effects from Turkish concerns for the major currencies or for global financial markets more broadly", said Erik Nelson, currency strategist at Wells Fargo Securities in NY.

The lira has lost almost 40 per cent against the dollar this year, driven by worries over President Tayyip Erdogan's growing control over the economy and his repeated calls for lower interest rates despite high inflation.

The lira held steady during Albayrak's conference call but later weakened when Treasury Secretary Steven Mnuchin said the U.S. was prepared to levy more sanctions on Turkey if detained American pastor Andrew Brunson was not freed. Sterling edged higher from 14-month low against the dollar on Thursday but it gains were marginal despite strong British retail sales with the currency hamstrung by fears over Britain leaving the European Union.Hot weather and the World Cup boosted retail sales in July, data showed, but that offered little respite for the pound which traded just above the $1.27 level.

The finance minister will seek to reassure worldwide investors on Thursday in a conference call for which a ministry official said some far 3,000 people had signed up. That has only fanned the flames of Turkey's economic turmoil.

Amid continuing efforts to stabilize the Turkish lira, Economy and Finance Minister Berat Albayrak spoke with 3,000 investors on August 16, attempting to address some of the issues facing the economy.

Albayrak rejected seeking a bailout from the International Monetary Fund, an option never seen as likely given that Erdogan often boasts of paying off Turkey's past International Monetary Fund debts in May 2013.


Trump has also authorized higher steel and aluminum tariffs against Turkey.

The lira's drop in value is certain to further fuel inflation, which is already near 16 percent.

Global investors have been anxious by Turkey's high levels of foreign debt and Erdogan's refusal to allow the central bank to raise interest rates to support the currency, as experts say it should.

In response, Erdogan has called for a boycott of United States electrical goods while Ankara has sharply hiked tariffs on some USA goods.

He has also warned Ankara could start looking for new allies, as well as new markets.

It has gained some support from the announcement late on Wednesday of a Qatari pledge to invest United States dollars 15 billion in Turkey.

Turkey's Foreign Minister Mevlut Cavusoglu on Thursday reiterated his criticism of US's current political stance against Turkey.

Mr Erdogan held a similar conversation with Germany's Angela Merkel on Wednesday.

Albayrak on Thursday spoke with his German counterpart Olaf Scholz on the phone, where the two ministers agreed to "take steps in order to reinforce economic cooperation", Albayrak's office said in a statement.

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