Turkish lira loses another 7% as economic crisis deepens

Turkish crisis littered with lessons for Trump US economy

The Turkish currency plunged 25 per cent against the USA dollar last week, with most of that depreciation happening on Friday amid escalating tensions with the Trump administration and market uncertainty about the ability of President Recep Tayyip Erdogan to manage the mounting problems in the Turkish economy.

The embattled Turkish lira tumbled over 16 percent to new record lows against the dollar as strains with the United States intensified over a number of issues including the detention of a pastor as well as Washington's cooperation with Syrian Kurdish militia force in the fight against Islamic State.

"From Monday morning onwards our institutions will take the necessary steps and will share the announcements with the market", Albayrak said, without giving details on what the steps would be.

He said Turkey's response was not going to be based on "reciprocity", adding: "Those who commit a crime will pay a price".

He indicated that the entire alliance between Turkey - which joined North Atlantic Treaty Organisation in 1952 with strong American backing - and the United States was at stake.

On Sunday, speaking to supporters in Trabzon on the Black Sea coast, Erdogan dismissed suggestions that Turkey was in a financial crisis like those seen in Asia two decades ago.

Washington had already imposed sanctions on two Turkish ministers earlier this month and on Friday President Donald Trump announced a doubling of USA tariffs of Turkish steel and aluminium, saying, "Our relations with Turkey are not good at this time!"

"In general, the size of Panda bonds, or any single bond issuance in any other currencies, is likely to be far too small to have any impact on either the Turkish lira or onshore yuan or China's RMB internationalisation agenda", said Becky Liu, head of China macro strategy at Standard Chartered.

Erdogan's solution so far has been to try and put political pressure on the United States by accusing it of waging economic "war" and urging Turkish citizens to sell gold and U.S. dollars in favour of the lira.

Concerns about contagion from the lira's plunge weighed on Asian stock markets on Monday, with 24 out of 26 Asian indexes reporting declines. "With God's permission we will overcome this". Erdogan said. "There is no economic reason for this".

Albayrak said budget discipline would be the most important foundation of Turkey's new economic approach and fiscal rules would be implemented for targeted indicators if necessary.

Turkey has "solid and strong" economic dynamics in the face of the recent "economic siege" on the country, President Recep Tayyip Erdoğan said on Monday.

"You dare to sacrifice 81-million (in) Turkey for a priest who is linked to terror groups?"

Erdogan, who has called himself the "enemy of interest rates", wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing.

Mr Erdogan had on Saturday described interest rates as a "tool of exploitation", in remarks that may not be warmly welcomed by the markets.

Brunson was charged with committing crimes, including spying for the PKK - listed as a terrorist group by both the US and Turkey - and the Gülenist Terror Group (FETÖ), the group behind the defeated coup attempt of July 2016. Trump has described his detention as a "total disgrace" and urged Erdogan to free him immediately.

Last week, the USA imposed sanctions on Turkey's justice minister and interior minister for refusing to release American pastor Andrew Brunson, who had been in custody since 2016 on charges of terrorism and espionage that Washington says are bogus.

The Brunson case is just one of many bones of contention between Turkey and the United States, ranging from Syria to Ankara's increasingly cosy relationship with Moscow.

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