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Trump warns Turkey over detained pastor

18 August 2018

US stocks and emerging market currencies rebounded on Thursday after China said it will hold trade talks with the United States this month and Turkey's lira continued its recovery.

The US comments came after Finance Minister Berat Albayrak, Erdogan's son-in-law, assured investors on Thursday that Turkey would emerge stronger from its currency crisis, insisting its banks were healthy and signaling it could ride out the dispute.

As Ankara sought to reassure markets after the lira went into a tailspin over the deepening spat, US Treasury Secretary Steven Mnuchin warned more sanctions would be on the way until Andrew Brunson was released.

Albayrak's ministry said they had discussed USA sanctions against Turkey and agreed to act together in responding to such moves and to boost cooperation between their countries.

Ankara has launched a diplomatic offensive against the sanctions imposed by the United States over the continued detention of American pastor Andrew Brunson.

The euro, which had also been hit by fears of a spillover from Turkey's financial crisis, was among the currencies to benefit from the news of trade talks.

The row is likely to escalate in the coming days after a court in the Turkish city of Izmir made a decision to reject an appeal for release by Mr Brunson.

But Washington's move has sent Turkey's financial markets into a tailspin: the Turkish lira plummeted more than 18 per cent at one point last Friday to a record low against the USA dollar.

That would require "an increase in the policy credibility and independence of the central bank, tolerance of weaker growth by policymakers, and a reduction in macroeconomic and financial imbalances", Fitch said in a statement Friday.

Despite its economic woes, Turkey did this week find support from friendly Qatar, which promised to make a US$15 billion direct investment in the country. "They are now holding our wonderful Christian Pastor, who I must now ask to represent our Country as a great patriot hostage".

Another steep decline in the Turkish lira on Friday pushed emerging market equities lower and kept other world markets cautious, overshadowing hopes that an upcoming U.S.

The leader of Turkey's main opposition party said Erdogan was using the standoff over the evangelical pastor as a "pretext", blaming the United States for economic problems and diverting attention from his own alleged mismanagement.

However, deep concerns remain about the potential for damage to the economy.

Turkish markets will be closed from midday on Monday for the rest of the week for Eid Al Adha.

Turkey has the highest foreign exchange-denominated debt among emerging markets, Societe Generale said in its note on Friday, estimating its short-term external debt at $180 billion and total external debt at $460 billion.

China and the United States agreed on Thursday to hold a new round of trade talks on August 21-22, supporting the yuan.

Trump warns Turkey over detained pastor