The Turkish lira plummeted over the weekend, hitting a record low of 7.06 lira to the dollar in early Asian trade. The move sent global markets broadly lower as investors worried about Turkey’s tumultuous relationship with the United States and Turkish President Tayyip Erdogan’s strengthening control over his country’s economy.
The lira is down nearly 40 percent this year, pressured by Erdogan’s calls for lower interest rates despite the country’s high inflation as well as his continued political skirmishes with the U.S. The lira’s struggles directly impacted the euro which hit a one-year low against the Swiss franc early on Monday, trading at 1.1300 francs as if 9:50 a.m. HK/SIN. The euro hit a 10-week low of 125.29 against the yen.
According to Turkish Finance Minister Berat Albayrak, a new economic action plan will be implemented on Monday morning to bring peace of mind to investors. Albayrak commented that the plan will impact banks and small to medium-sized businesses which have been hard hit by the lira’s dramatic recent declines. On Friday the lira fell as much as 18 percent, its steepest decline since 2001.
As reported by Reuters, Albayrak told Turkey’s Hurriyet newspaper that "From Monday morning onwards our institutions will take the necessary steps and will share the announcements with the market," though there were no details given as to what the next steps will be. He did wave off the notion that Turkey would get involved with dollar-denominated bank accounts.
According to CNBC, President Erdogan told Turkish reporters on Sunday that his country was not in a financial crisis and that the lira’s crash did not represent Turkish economic fundamentals. He referred to the hullaballoo surrounding the lira as a “storm in a teacup” and referred to his country’s economic troubles as “an operation against Turkey.”
U.S.-Turkish Tensions
Turkey and the U.S. have recently butted heads over a handful of issues including differing interests regarding the civil war in Syria and Turkey’s desire to purchase Russian defense systems. The detainment of a Andrew Brunson, an evangelical pastor in Turkey has also been a sore point for President Trump, who attempted to flex his muscles by sanctioning two Turkish ministers and adding addition tariffs on Turkish steel and aluminum. Just last week a Turkish delegation met with U.S. politicians in Washington, but no progress was made towards the thawing of relations between the countries.