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Erdogan to ban USA electronics in spat while lira plunges

16 August 2018

"The drop by the Turkish lira may have stopped, but the country is yet to tackle the fundamental problems facing it, and this has kept market sentiment subdued", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

USA sanctions, including the latest round targeting Turkey, undermine all principles of global trade and in time this move will undermine the role of US dollar as a settlement currency, he said.

Turkey's President Recep Tayyip Erdogan delivers a speech in Ankara, Turkey, on August 14, 2018.

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

Turkey is mired in a currency crisis, with the lira down more than 40 per cent this year amid escalating tensions with the United States, a North Atlantic Treaty Organisation ally, but Ankara also faces a large current account deficit and stubbornly high inflation. The lira - which plummeted to a record low of 7.24 to the dollar at the week's start, rattling global markets - was about 2 per cent weaker at 6.47 after rebounding more than 8 per cent overnight.

Investors were also comforted by news that finance minister Berat Albayrak would hold a conference call with investors from the United States, Europe and the Middle East tomorrow, his first since assuming the post nearly two months ago.

He said Russian Federation and Turkey have set a goal to switch from dollars to national currencies in mutual trade.

"Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates".

"We will protect the lira, we will march with the lira and the lira will strengthen greatly in the coming period", he told members of President Tayyip Erdogan's AK Party.

Turkey and the U.S. are now experiencing rocky relations following Washington's imposition of sanctions on Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul for not releasing American Pastor Andrew Brunson, who faces terrorism charges in Turkey.

Following the latest announcement, Turkey's presidential spokesman Ibrahim Kalin has called on the engage in diplomacy. His case now lies at the heart of a diplomatic crisis between Turkey and the United States that has sent Turkish lira into free-fall.

Just days after President Trump tweeted his decision to double tariffs on Turkish steel and aluminum, Turkey has announced that it, too, is ratcheting up retaliatory tariffs.

Press secretary Sarah Huckabee Sanders also criticized Turkey's move to impose tariffs on some USA goods as "regrettable and a step in the wrong direction".

President Donald Trump has repeatedly called for a weaker USA dollar in a bid to help US exporters, but his recent trade policies, including the imposition of import tariffs on some Turkish goods, have instead strengthened the greenback.

"We will boycott America's electronic products", Erdogan said mentioning that Turkey would produce the better of every product bought with foreign currencies and export them.

In Istanbul's historic Eminonu neighborhood, tourists expressed mixed feelings about their cheaper vacation in Turkey. Military ties between Turkey and the U.S. are already fraught over Washington's support to Syrian Kurdish fighters known as the YPG, which Ankara sees as little more than an offshoot of the "terrorist" Kurdistan Workers Party (PKK). "We will support him until the end". "I have a 16-year-old daughter".

Albayrak said: "You will see that our lira will become stronger".

His comments, however, have failed to quell a crisis that economists say is largely self-inflicted, owing to an overheated economy and the debt exposure of Turkey's companies and banks.

"If we postpone our investments, if we convert our currency to foreign exchange because there's danger, then we will have given in to the enemy", he said. Bank of Ireland fell 1.6pc to €7.36. USA officials say National Security adviser John Bolton had met with the Turkish ambassador to Washington on Monday. 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.

Turkish media reports say a Turkish court has rejected an appeal for the release of an American pastor from detention.

Erdogan to ban USA electronics in spat while lira plunges