Turkish lira plunges 13% to record low
- by Xavier Trudeau
- in Financer
- — Aoû 10, 2018
The Turkish lira has updated a record low against the USA dollar after a delegation from Ankara left Washington without a solution to a diplomatic conflict over the arrest of an American pastor in Turkey.
President Recep Tayyip Erdogan has called on Turks to "have no worries" after the national currency lira hit a new record low amid political tensions with the USA.
Erdogan, who has already said his country is facing an "economic war", told supporters in the Black Sea province of Rize late on Thursday that there were "various campaigns being carried out" against the country. The currency has fallen 66 percent since the start of the year. "Consequently, the United States has imposed sanctions on Turkey's Interior Minister and Justice Minister with the possibility of further sanctions on the country".
"You have some very odd politics with the president interfering with monetary policy - they are picking fights with Europe, they are picking fights with the Americans", said Paul McNamara, an investment director at GAM London Limited, as quoted by Reuters.
The new economic action plan calls for Turkey to issue a renminbi bond and borrow from China to proceed with 400 new infrastructure and other showpiece projects whose value is estimated at $9 billion.
The Turkish economy has expanded rapidly this year compared with 2017. "Due to the foreign debts of companies and banks and the current account deficit, there is a great need for foreign capital".
Investors are now awaiting the release of USA consumer price inflation data for July for clues on the interest rate outlook and to gauge if new import tariffs were starting to have an impact. Erdogan said China, Mexico, Russia and India will be new markets for his country's exports. Once any crisis was over, the bank expects exports to recover quickly. Even in the worst case scenario, "bank supervisors in the eurozone would have sufficient tools at their disposal to contain the damage", making a credit crunch in any part of the eurozone highly unlikely, concludes the upbeat analysis. "The Europeans should have known that they should not lend to distressed banks", criticizes Boratav.
