US seeks release of jailed American pastor Andrew Brunson from Turkey

Euro vs US Dollar Chart- 5min

Economic turmoil hits Turkey, US bank stocks react

The currency's drop - 40% so far this year - has become a gauge of fear over a country facing the fallout of years of debt-fuelled growth, global concern over President Recep Tayyip Erdogan's push to amass power, and a souring in relations with allies like the US.

Meanwhile, Atlantic Council Middle East expert, Aaron Stein, claims Erdogan might have made an error in overestimating his importance to President Trump, adding that if Turkey denied the United States access to the Incirlik military base, with which the us has strategic interests, such a move would invoke the wrath of NATO allies. "Nobody should try to make us fall into this trap, we won't be fooled by this plot, nobody should get excited".

The Turkish strongman also lashed out at interest rates, denounced them as a "tool of exploitation" which should be kept as low as possible.

His comments on interest rates - and his recent appointment of his son-in-law as Finance Minister - have heightened perceptions that the central bank is not independent. The lira fell further as Erdogan spoke. "What is the reason for all this storm in a tea cup? This is called carrying out an operation against Turkey", he said.

Erdogan's words did little to reassure investors.

The euro slid sharply against the dollar after the announcement as it was reported that the European Central Bank was concerned about the performance of the lira and the impact it was having on European financial institutions.

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The lira tumbled 13% in one day, to 6.51 per USA dollar, a massive move for a currency that will make the Turkish poorer and further shake worldwide investors' confidence in the country.

But Turkey is not manipulating its currency; the lira is falling because the country is suffering from an economic crisis.

"I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars".

The lira sell-off has deepened worries particularly about whether over-indebted firms will be able to pay back loans taken out in euros and dollars after years of overseas borrowing to fund a construction boom, Reuters reported. "You should know that to keep this nation standing is. also the manufacturers" duty".

Although Mr Erdogan struck a defiant tone, his foreign ministry called for diplomacy and dialogue to solve problems with the US.

Washington and Ankara have been at odds over a wide range of topics - from diverging interests in Syria to Turkey's ambition to buy Russian defence systems, and the case of evangelical USA pastor Andrew Brunson.

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The White House followed through on that threat on August 1 and sanctioned two top Turkish officials linked to Brunson's ordeal.

The Turkish president was referring to American pastor Andrew Brunson, who is accused of ties to Erdogan's arch-nemesis, Muslim cleric Fetullah Gulen, who lives in exile in Pennsylvania, and whose extradition the Turks have been demanding on the grounds that he organized the 2016 coup attempt against the Erdogan regime.

Unprecedented punitive sanctions declared by the U.S. President Donald Trump's administration on two Turkish ministers over the detention of an American pastor, as well as doubling tariffs on steel and aluminum, have worsened relations between the North Atlantic Treaty Organisation allies to their lowest over decades.

"We will give our answer, by shifting to new markets, new partnerships and new alliances, to the one who waged an economic war against the entire world and also included our country", Erdogan said.

A delegation led by Turkish Deputy Foreign Minister Sedat Onal failed to secure a deal last Wednesday in talks in Washington on a number of issues including Mr Brunson.

"If there are dollars under your pillow, take these out", he told supporters in the north-eastern Turkish town of Ünye.

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Speaking to supporters on August 11 in the northeastern Turkish town of Unye, Erdogan also said it was a pity the United States was choosing Andrew Brunson - a USA pastor on trial in Turkey on terrorism charges - over its strategic North Atlantic Treaty Organisation ally, Ankara.

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