Asian stock markets recover from the escalating financial crisis in Turkey

Mae Love
August 14, 2018

The lira stabilised against the United States dollar on Tuesday just above the all-time low posted early Monday, but most analysts believe the crisis is not yet over.

USA and global markets fell on Friday and Monday, reflecting concerns that Turkey's problems could spread. Its drop of as much as 18 percent on Friday hit European and US stocks as investors fretted about banks' exposure to Turkey.

On Tuesday the lira recovered some ground, trading at 6.5300 to the dollar at 1334 GMT, up around five percent on the day.

Mr Erdogan has presided over soaring inflation and borrowing levels, but insists the lira's plight is the result of a "campaign" led by foreign powers.

Turkey's lira currency has been falling steadily for the past year because of a clearly stated view by Mr. Erdogan that interest rates are "evil", and because he has been controlling Turkey's central bank consistent with that belief.

"Together with our people, we will stand decisively against the dollar".

Turkey's ambassador to Washington Serdar Kilic on Monday held talks with US National Security Adviser John Bolton in a meeting what Foreign Minister Mevlut Cavusoglu said was arranged by the White House.

Turkey's president fired a new salvo in the growing war of words with the United States on Tuesday, saying Ankara will boycott all American-made electronic products.

'They don't hesitate to use the economy as a weapon, ' he said.

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Analysts say the financial crisis has been a long time coming and reflects Turkey's refusal to raise interest rates to curb double-digit inflation and cool an overheated economy. We will impose a boycott on U.S. electronic products. Yasar Subasi, an Istanbul resident said, "For real, right now we think about the dollar when we go to sleep and when we get up". "And now we will support him with our goods".

The Associated Press reported that Turkish President Recep Tayyip Erdogan did not clarify how the boycott would be enforced in an announcement of the measure.

The BBC Turkey correspondent Mark Lowen says Mr Erdogan's boycott could stoke tensions with the USA further - and Turks are waiting nervously for Mr Trump's response.

Prices for basic goods imported from overseas are rising, most importantly food and other raw materials purchased with hard currency.

Two Turkish business lobbies and the heads of two banks increased pressure on the government and central bank to act to stem a slide that saw the lira lose more than a quarter of its value in less than two weeks. "What do you want to do?"

Investors are anxious that Turkish companies that borrowed heavily to profit from a construction boom may struggle to repay loans in dollars and euros, as the weakened lira means there is now more to pay back.

The United States' top diplomat in Turkey, Jeffrey Hovenier, visited Brunson on Tuesday and called for his case - and those of others detained in Turkey - to be resolved "without delay" and in a "fair and transparent manner". U.S. officials say National Security adviser John Bolton had met with the Turkish ambassador to Washington on Monday. "And we have our own telephone brands", he added.

The day after the summit, Israel let the Turkish woman walk free, but Turkey merely moved Brunson from jail to house arrest, where he remains today.

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