Turkey's lira weakens more than 6% on threat of more US sanctions

Shares, emerging market currencies steady after mauling | News | 1330 & 101.5 WHBL

Turkish lira steady despite new threats from Trump

A Turkish court has rejected an appeal for United States Christian pastor Andrew Brunson to be released from house arrest during his trial on terrorism charges.

Trump, before leaving the White House on Friday, denounced Turkey as a "problem for a long time" and said it made up a "phony" spying charge against Andrew Brunson.

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.

Since then the South African rand has fallen by the most in a decade, the Mexican peso has slumped and the Turkish lira has lost more than 40 per cent of its value since the start of the year.

"Turkey has not done any wrong to the US, not even once".

"We've put sanctions on several of their cabinet members, working with you (President Donald Trump), we have more that we're planning to do if they don't release him quickly", Mnuchin told Trump during Thursday's cabinet meeting.

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The hope is this will resolve a tariff war that threatens to curb global economic growth at a time when the US Federal Reserve is raising interest rates, creating difficulties for emerging market economies that have high external borrowing requirements.

The Trump administration has threatened to levy more sanctions against Turkey, a move that has rattled the nation's financial markets.

Ratings agency Moody's has downgraded Turkey's credit rating deeper into "junk" status and slapped a "negative" rating on its outlook. Turkish officials say the case is a matter for the courts.

Turkey's currency, which had recovered from record losses against the dollar earlier in the week, was down about 6 percent against the dollar on Friday, at 6.17.

But according to Middle East Eye, Turkish diplomats said they could release Brunson anyway, subject to further concessions from the USA which could soothe diplomatic tensions and helping alleviate the diplomatic and economic crisis.

But some economists have called for more decisive moves. Those sanctions caused great turmoil in financial markets, and contributed to the huge slump seen by the Turkish lira in the last two weeks.

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The Chinese currency's slide in recent months, partly on the back of concerns about what a full-blown trade war with the US would do to China's economy, has rattled investors.

Economists gave Mr Albayrak's presentation a qualified welcome and the lira initially found some support, helped by Qatar's pledge to invest US$15 billion in Turkey.

The latest USA announcement came after Turkish Finance Minister Berat Albayrak tried to soothe the markets during an unprecedented conference call with hundreds of foreign investors, insisting Turkey would emerge "stronger" from the currency crisis and would not need an International Monetary Fund bailout.

Deep concerns remain about the potential for damage to the economy, however.

Turkish markets will be closed from midday on Monday for the rest of the week for the Muslim Eid al-Adha festival.

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