Tag Archives: Lira

Turkey’s lira weakens 4 percent, Trump says won’t take pastor’s detention ‘sitting down’

A street vendor sells food on a main street in central Ankara, Turkey August 17, 2018. REUTERS/Umit Bektas

By Daren Butler, David Dolan and Humeyra Pamuk

ISTANBUL (Reuters) – Turkey’s battered lira weakened 3 percent on Friday after a Turkish court rejected an American pastor’s appeal for release, drawing a stiff rebuke from President Donald Trump, who said the United States would not take the detention “sitting down”.

The case of Andrew Brunson, an evangelical Christian missionary from North Carolina who has lived in Turkey for two decades, has become a flashpoint between Washington and Ankara and accelerated a widening currency crisis.

The lira has lost nearly 40 percent of its value against the dollar this year as investors fret about President Tayyip Erdogan’s influence over monetary policy.

Heavy selling in recent weeks has spread to other emerging market currencies and global stocks and deepened concerns about the economy, particularly Turkey’s dependence on energy imports and whether foreign-currency debt poses a risk to banks.

Borrowing costs may rise further after both Moody’s and Standard Poor’s ratings agencies cut Turkey’s sovereign credit ratings deeper into “junk” territory late on Friday.

“They should have given him back a long time ago, and Turkey has in my opinion acted very, very badly,” Trump told reporters at the White House, referring to Brunson. “So, we haven’t seen the last of that. We are not going to take it sitting down. They can’t take our people.”

Trump’s comments came after a court in Izmir province rejected an appeal to release Brunson from house arrest, saying evidence was still being collected and the pastor posed a flight risk, according to a copy of the court ruling seen by Reuters.

Brunson is being held on terrorism charges, which he denies. Trump, who counts evangelical Christians among his core supporters, has increasingly championed the pastor’s case.

It was not immediately clear what additional measures, if any, Trump could be considering. U.S. Treasury Secretary Steven Mnuchin told Trump on Thursday that more sanctions were ready if Brunson were not freed.

The United States and Turkey have imposed tit-for-tat tariffs in an escalating attempt by Trump to induce Erdogan into giving up the pastor. Erdogan has cast the tariffs, and the lira’s sell-off, as an “economic war” against Turkey.

The lira last traded at 6.0100 to the dollar at 2159 GMT, 3 percent weaker after tumbling as much as 7 percent earlier. Turkey’s dollar bonds fell, while the cost of insuring exposure to Turkish debt rose.

As the row deepens, Turkey has sought to improve strained ties with European allies. In a telephone call on Friday, Finance Minister Berat Albayrak and his French counterpart Bruno Le Maire discussed U.S. sanctions against Turkey and cooperation between their countries, Albayrak’s ministry said.

SPEED-BUMPS

“Diplomatic negotiations hit speed-bumps and that’s not unusual in these kinds of situations,” said Jay Sekulow, a personal attorney for Trump who is also representing Brunson’s family. “We remain hopeful there will be a prompt resolution. Having said that, we fully support the president’s approach.”

Whatever action the United States takes looks likely to cause more pain for Turkish assets.

People change money at a currency exchange office in Istanbul, Turkey August 17, 2018. REUTERS/Murad Sezer

People change money at a currency exchange office in Istanbul, Turkey August 17, 2018. REUTERS/Murad Sezer

“There has been no improvement in relations with the U.S. and additional sanctions may be on the horizon,” said William Jackson of Capital Economics in a note to clients, adding that the lira could see a downward trend in 2019 and beyond.

Turkey’s banking watchdog has taken steps to stabilize the currency, limiting futures transactions for offshore investors and lowering limits on swap transactions. On Friday, it further broadened those caps.

But some economists have called for more decisive moves.

Turkey and its firms face repayments of nearly $3.8 billion on foreign currency bonds in October, Societe Generale has calculated. It estimates Turkey’s short-term external debt at $180 billion and total external debt at $460 billion – the highest in emerging markets.

Companies that for years have borrowed abroad at low-interest rates have seen their cost of servicing foreign debt rise by a quarter in lira terms in two months.

After each downgrading Turkey by one notch, S&P said it expected a recession next year while Moody’s said a weakening of Turkey’s public institutions had made policymaking less predictable.

Fitch Ratings had earlier said the absence of an orthodox monetary policy response to the lira’s fall, and the rhetoric of Turkish authorities, had “increased the difficulty of restoring economic stability and sustainability”.

DEEP CONCERNS

Albayrak, Erdogan’s son-in-law, told investors on Thursday that Turkey would emerge stronger from the currency crisis, insisting its banks were healthy and signaling it could ride out the dispute with Washington.

Economists gave Albayrak’s presentation a qualified welcome and the lira initially found some support, helped by Qatar’s pledge to invest $15 billion in Turkey.

Deep concerns remain about the potential for damage to the economy, however. Turkey is dependent on imports, priced in hard currency, for almost all of its energy needs.

Erdogan has remained defiant, urging Turks to sell their gold and dollars for lira. But foreign currency deposits held by local investors rose to $159.9 billion in the week to Aug. 10, from $158.6 billion a week earlier, central bank data showed.

Turkish markets will be closed from midday on Monday for the rest of the week for the Muslim Eid al-Adha festival.

(Additional reporting by Ece Toksabay, Tuvan Gumrukcu, and Nevzat Devranoglu in Ankara; Karin Strohecker and Claire Milhench in London; Jeff Mason and Karen Freifeld in Washington; Editing by Catherine Evans and James Dalgleish)

Erdogan says Turkey will boycott U.S. electronics, lira steadies

Businessmen holding U.S. dollars stand in front of a currency exchange office in response to the call of Turkish President Tayyip Erdogan on Turks to sell their dollar and euro savings to support the lira, in Ankara, Turkey August 14, 2018. REUTERS/Umit Bektas

By Daren Butler and Behiye Selin Taner

ISTANBUL (Reuters) – President Tayyip Erdogan said on Tuesday that Turkey would boycott electronic products from the United States, retaliating in a row with Washington that helped drive the lira to record lows.

The lira has lost more than 40 percent this year and crashed to an all-time low of 7.24 to the dollar on Monday, hit by worries over Erdogan’s calls for lower borrowing costs and worsening ties with the United States.

The lira’s weakness has rippled through global markets. Its drop of as much as 18 percent on Friday hit European and U.S. stocks as investors fretted about banks’ exposure to Turkey.

On Tuesday the lira recovered some ground, trading at 6.4000 to the dollar at 1751 GMT, up almost eight percent from the previous day’s close and having earlier touched 6.2995.

It was supported by news of a planned conference call in which the finance minister will seek to reassure investors concerned by Erdogan’s influence over the economy and his resistance to interest rate hikes to tackle double-digit inflation.

Erdogan says Turkey is the target of an economic war and has made repeated calls for Turks to sell their dollars and euros to shore up the national currency.

“Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together,” he told members of his AK Party in a speech.

The United States has imposed sanctions on two Turkish ministers over the trial on terrorism charges of a U.S. evangelical pastor in Turkey, and last week Washington raised tariffs on Turkish metal exports.

It was unclear whether Erdogan’s call was widely heeded, but a Turkish news agency said traders in Istanbul’s historic Eminonu district converted $100,000 into lira on Tuesday.

Chanting “Damn America”, they unfurled a banner saying “we will win the economic war”, the Demiroren agency said. Amid calls to “burn” the dollars, the group headed to a bank branch where they converted the money, it said.

Erdogan also said Turkey was boycotting U.S. electronic products. “If they have iPhones, there is Samsung on the other side, and we have our own Vestel here,” he said, referring to the Turkish electronics company, whose shares rose 5 percent.

His call met a mixed response on Istanbul streets.

“We supported him with our lives on July 15,” shopkeeper Arif Simsek said, referring to a failed 2016 military coup. “And now we will support him with our goods. We will support him until the end.”

But shopkeeper Umit Yilmaz scoffed. “I have a 16-year-old daughter. See if you can take her iPhone away … All these people are supposed to not buy iPhones now? This can’t be.”

INVESTMENT INCENTIVES

Erdogan said his government would offer further incentives to companies planning to invest in Turkey and said firms should not be put off by economic uncertainty.

“If we postpone our investments, if we convert our currency to foreign exchange because there’s danger, then we will have given into the enemy,” he said.

Although the lira gained some respite on Tuesday, investors say measures taken by the Central Bank on Monday to ensure liquidity failed to address the root cause of lira weakness.

“What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain — but without it there’s just no credibility of promises to restabilize things,” said Craig Botham, Emerging Markets Economist at Schroders.

Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.

Relations between NATO allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara’s plan to buy Russian defense systems and the detention of pastor Andrew Brunson.

U.S. national security adviser John Bolton on Monday met Turkey’s ambassador to the United States to discuss Brunson’s detention. Following the meeting, U.S. officials have given no indication that the United States has been prepared to give ground in the standoff between the two countries’ leaders.

Ankara has repeatedly said the case was up to the courts and a Turkish judge moved Brunson from jail to house arrest in July. Infuriated by the move, Trump placed sanctions on two Turkish ministers and doubled tariffs on metal imports, adding to the lira’s slide.

Brunson’s lawyer said on Tuesday he had launched a fresh appeal to a Turkish court for the pastor’s release.

(Additional reporting by Ece Toksabay and Ezgi Erkoyun, Writing by Humeyra Pamuk and Dominic Evans, Editing by William Maclean and Jon Boyle)

Erdogan vows action against ‘economic terrorists’ over lira plunge

Turkey's President Tayyip Erdogan addresses Turkish Ambassadors during a meeting in Ankara, Turkey August 13, 2018. Kayhan Ozer/Presidential Palace/Handout via REUTERS

By Tuvan Gumrukcu

ANKARA (Reuters) – President Tayyip Erdogan on Monday accused “economic terrorists” of plotting to harm Turkey by spreading false reports and said they would face the full force of the law, as authorities launched investigations of those suspected of involvement.

The lira currency, which has lost more than 40 percent against the U.S. dollar this year, pulled back from a record low of 7.24 earlier on Monday after the central bank pledged to provide liquidity, but it remained under selling pressure and its meltdown continued to rattle global markets.

“There are economic terrorists on social media,” Erdogan told a gathering of Turkish ambassadors at the presidential palace in Ankara, adding that the judiciary and financial authorities were taking action in response.

“They are truly a network of treason,” he added. “We will not give them the time of day… We will make those spreading speculations pay the necessary price”.

Erdogan, who gained sweeping new powers following his re-election in June, said rumors had been spread that authorities might impose capital controls in response to the slump in the currency, which tumbled as much as 18 percent on Friday alone.

The interior ministry said it had so far identified 346 social media accounts carrying posts about the exchange rate that it said created a negative perception of the economy. It said it would take legal measures against them but did not say what these would be.

Separately, the Istanbul and Ankara prosecutor’s offices launched investigations into individuals suspected of being involved in actions that threaten Turkey’s economic security, broadcaster CNN Turk and state news agency Anadolu reported.

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.

Earlier on Monday, Finance Minister Berat Albayrak, who is also Erdogan’s son-in-law, said Turkey would start rolling out an economic action plan on Monday.

Albayrak stressed the importance of budget discipline and ruled out any seizure or conversion of dollar-denominated bank deposits into lira.

Economists say the lira’s fall is due to worries about Erdogan’s influence over the economy, his repeated calls for lower interest rates, and worsening ties with the United States over the detention of a Christian pastor and other disputes.

Erdogan reiterated on Monday his view that the currency’s crash had no economic basis, saying that U.S. sanctions imposed on Turkey over the terrorism trial of the pastor, Andrew Brunson, represented a “stab in the back” by a NATO ally.

The lira stood at 6.89 against the U.S. dollar at 1511 GMT – after Erdogan’s comments – up from a record low of 7.24 to the dollar reached in early Monday trade.

(Additional reporting by Ali Kucukgocmen; Editing by Dominic Evans and Gareth Jones)