Turkish Lira Recovery Is At Risk As Tensions With US Remain High

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On August 16th, the Turkish lira continued its recovery after the announcement of a $15 billion funding package from Qatar.

On August 13th, the Turkish lira reached a historical low against the dollar, after dropping about 45% during 2018. It has since started to recover.

The latest strengthening of the lira comes after Qatar’s funding. Tamim bin Hamad Al Thani, the Amir of Qatar, tweeted: “Today, in the framework of important negotiations with His Excellency President Erdogan in Ankara, we announced a package of deposits and investment projects worth $15 billion in this country, which has a productive, strong and robust economy.”

In answer, Turkish President Tayyip Erdogan tweeted: “On behalf of the Turkish people, I sincerely thank Sheikh Tamim and the Qatari people for standing by Turkey. There is no doubt that our strong relations with the friendly and brotherly state of Qatar will continue to evolve in many areas.”

The lira has come under pressure due to a diplomatic fallout over the arrest of American Pastor Andrew Brunson, as well as the purchase of S-400 Triumf missile systems from Russia. It was further reinforced after Erdogan perceive control of Turkey’s central bank and the strong US dollar. The Turkish President accused the US of waging an economic “war” against the country.

The decrease in value began on August 1st, when the US imposed sanctions on two Turkish ministers. However, the decrease in value of the lira became rapid after US President Donald Trump increased tariffs on Turkish steel by 50% and aluminum by 20%. To which Turkey responded with increase tariffs of their own on US goods such as automobiles, electronics, alcohol and tobacco products.

The pressure on the lira began easing as early as August 13th, when the Turkish central bank pledged to undertake “all necessary measures” to protect the economy.

After the Central Bank’s actions and the counter-tariffs imposed by Turkey, the lira recovered some of its value. However, Business Insider cited Hussein Sayed, the chief market strategist at FXTM, who on August 16th had the following to say in an email: “Such measures may only provide short-term relief and policymakers need to address the longer-term challenges that will face the country. With inflation expected to skyrocket in the coming months, a current account deficit that exceeds $50 billion and more than $16 billion of debt maturing in 2019, investors fear that the currency crisis will turn into a debt crisis. Even if tensions between the US and Turkey are resolved, investors still need to see serious fiscal and monetary measures to restore confidence.”

However, on August 16th, US Treasury Secretary Steven Mnuchin said that the US is ready to impose Turkey with even more sanctions. “We put sanctions on several of the Cabinet members,” Mnuchin said on August 16th during a Cabinet meeting at the White House. “We have more that we’re planning to do if they don’t release him quickly.”

President Trump said that Turkey “has not been a good friend” to the US and that his administration had secured the release of a Turkish citizen from an undisclosed country on behalf of Erdogan, however Turkey refused to reciprocate the action by releasing Andrew Brunson.

On August 16th, in a conference call with around 6,000 investors Turkish Finance Minister Berat Albayrak, who is also Erdogan’s son-in-law, said that Turkey had no plans to bring in capital controls such as restricting bank withdrawals and the movement of money in and out of the country. Turkey also was not planning to seek help from the International Monetary Fund.

Albayrak, when speaking to the investors, claimed that Turkey would not hesitate to provide support to the banking sector, which was capable of accessing funds itself during the current turmoil in financial markets. He added that deposit withdrawals by panicked investors remained low and manageable.

Despite the lira restoring its value a fair bit after Albayrak’s conference call, the announcement of possible further US sanctions halted its increase in value slightly. Turkey appears to be on the right track, due to its policy, as well as in no small part thanks to Qatar’s funding.

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  • You can call me Al

    I never thought I would say this, but Bravo Qatar and good luck Turkey – now FO out of Syria.

    • S Melanson

      This is truly historical. Time as we are witnessing the emergence of a multipolar world. Blocks of nations are coalescing to provide each other support in order to stand up to US hegemony. So indeed, bravo Qatar and I think it is also gratitude given Turkey backed Qatar and sent troops to deter a potential Saudi invasion.

      • You can call me Al

        I agree totally with you.

        On a note (your last sentence), let us see and hope, they step up to assist Iran….. now that would be exceptional.

  • KennyB

    While I do realise that it’s unlikely that European politicians are willing to cut ties and trade with the USA, I can see how it would lead to a long-term position that is far superior to vasselage to the USA. The Anglo-American-Zionist cabal have long been resisting a Eurasian co-operation framework, to the detriment of Europe. Why are we supposed to hate Russians? Perhaps we should be asking why Zionists, and in particular, the Rothschild family hate Russia so virulently that they have tried to destroy Russia so often.

    It’s inevitable that the next “Empire” will be Asian. Russia, China and India are already dominating in many areas, and exporting technology manufacturing to China and India has only accelerated the process. Seeing that the USA has lost any military advantage that it had in the late 1990s, maintaining the American Empire by force is doomed to fail.

    So, given that the economic power is shifting to Asia, should Europe also switch focus from the transatlantic alliance to a Eurasian co-operation framework? Since the USA has been the cause of many of the problems faced by European countries, and given that Russia and China are not in any way an existential threat to Europe, is it not time to tell the Yankees to pack up their junk and go back to America? Stuff their threats. We can do better without America in charge. Is there anything that the USA posesses that we can’t do without?

  • Jesus

    Turkey should be careful not to burn large foreign reserves in trying to defend the lira, Wall Street can use its clout to short the lira even more, stealing Turkey’s foreign reserves used to defend the lira. Turkey should find some more allies that would provide financial clout, blunting the dollar’s run against the lira. Selling US debt is one way to put the dollar on the defensive.

    • John Brown

      Turkey needs to make a deal with China to use some of China’s USSA dollars to buy Turkeys debt. Then Turkey needs to join the silk road and the Asian economic union and form an alliance with Russia and China. With an enemy like the racist supremacist global Jewish confederate slave empire dictatorship, Turkey can’t be neutral. At least in an alliance with Russia and China; Turkey will retain its sovereignty in an alliance of sovereign states, not slaves of Israel as NATO is.

      • Jesus

        Turkey should peg the lira to the yuan, Turkish central Bank should use their hard assets intelligently to counteract short selling and catch the speculating banks with their pants down. Trading in a basket of local currencies pegged to the yuan makes sense, and is good for every national entity fighting the dollar scourge.

        • John Brown

          Using assets to defend the currency pegging it to the Yuan is the trap. Look what happened to Argentina to name just one example. They can hit some banks with no risk to their own assets by changing the rules for trading the currency, with their own propaganda etc. The Qatar announcement was smart and cost nothing. They need to join the Asian economic union stop using USSA dollars in trade with third counties.
          Also Turkey needs to make a deal with China to use some of China’s USSA dollars to buy Turkeys debt. The turkey needs to join the silk road and the Asian economic union. With an enemy like the racist supremacist global Jewish confederate slave empire dictatorship, Turkey can’t be neutral. At least in an alliance with Russia and China; Turkey will retain its sovereignty in an alliance of sovereign states, not slaves of Israel as NATO is .

          • Jesus

            Pegging is not the concept I was conveying, they can trade in local currencies and ultimately they can use the yuan as base currency. Also bartering in goods and resources removes the need for any specific need for currency. China could sell some dollars during this scenario, however, if the US is bent on economic warfare, fighting with paper, I would recommend Turkey to default on the dollar denominated loans, and fight them back with paper.
            Turkey is going to buy Iranian oil regardless of the US sanctions, it will trade with Russia regardless of US sanctions, and it will trade with EU and many third world countries.
            All these sanctioned countries have to get their central banks out of the main central bank system and have financial independence, by being able to have control over their money supply and ability to print it, without constraints and repercussions. Of course they need to have a relatively strong economy, gold reserves and a population base that is willing to undergo some sacrifices.

  • Mikronos

    Turkey is finding out who its real friends are.

  • Manuel Flores Escobar

    Erdogan should tell to EU to help Turkish lira…or allow Russian base near Bosforous strait which means the end of NATO in black sea…

  • The Farney Fontenoy

    ZeroHedge did a decent analysis on this, this is a quick way for Turkey to dump the dollar entirely & further it’s swing from West to East:
    https://www.zerohedge.com/news/2018-08-10/lira-collapse-jump-mediterranean

  • Hisham Saber

    To hell with Turkey and their financial backers, Qatar. Both are guilty of meddling in the affairs of regional countries. In Syria and Libya. We know the story of Qatar and Turkey heavily supporting the fanatics that tried to seize control of Syria. Turkey provided the logistics for these fanatics, while Qatar provided financing.

    In Libya, Turkey and Qatar are going out of their way in causing instability and intermittent militia warfare in that country. Qatar is financing all sides in dispute in Libya to insure that Libya remains unstable, a failed state. Why would they do that ?

    Well, Qatar is the Middle East’s largest natural gas exporter,( actually the largest in the world right now, until Iran gets the South Pars field up and running at capacity along with its major shareholder China), and initially Turkey and Qatar had dreams of pipelines running through Syria all the way to Turkey, which would benefit greatly, and then the pipeline goes on to Europe. Well, there’s no chance for that pipeline now, that is squashed.

    Libya , after Iran, has the largest reserves of natural gas in the world. Libya is a stones throw away from Europe, a mere short pipeline to Italy and Europes needs for gas are taken care of, and cheaper than Qatari gas which comes from farther away, through the high insurance premium Strait of Hormuz.
    So a strong , stable Libya would be a problem for Qatar as that would mean eventually Libya taking a great piece of the worlds gas market share of exporters. Libya alone could supply all of Europe, quickly, cheaply, and consistently, unlike Qatar which has to constantly be weary of turmoil and friction between U.S. / Israel vs. Iran, and the turbulent political climate in Qatars immediate region.

    So now due to Qatar and Turkeys arrogance, Libyans continue to pay in blood , tears and treasure. Libya is totally a failed state, with waring parties heavily influenced by Qatar and Turkish agents.

    Sooner or later the game will be up for Qatar, as it will be swept up in the regions turbulence. Its good to see Turkey paying a price , cant wait till its Qatars turn.

  • Rob

    Erdogan says we don’t wanna do business in US dollar therefore, Lira will go up itself now.

    • Sinbad2

      Does it really have to go up?
      How are currencies valued?
      In theory a nations currency value is its stock price, but just like the stock market, the USA manipulates them. So a country making lots of money like Russia can have a low value currency.

      Millions of people all over the world live in hardship, because of the USA.

      • Rob

        What is stock? Stock are commodities that a country hold in the market for sale for example petroleum, minerals, agricultural, industrial and defence products, training and education, travel and tourism packages etc.

        • Sinbad2

          So a country’s currency value should be based on the profits it makes through its business enterprises.
          If that was the case, a country like China that makes a good profit year in and year out should have a high value currency, and a country like the US, that has been running at a loss, since the 1980’s should have a zero value currency.

          The US is doing what it has always done, I’ll give you these shiny glass beads for everything you own, if you don’t take the offer, I will kill you.

  • georgeking

    One wonders how long the Dollar wars can last before Nations just say no more to Greenback blackmail.

  • Sinbad2

    This is a standard American economic hit.
    First they offer you lots of dollars, at very low interest.
    Then they short your currency.
    Next they offer to lend you more dollars, at higher interest rates, to defend your currency, but they keep shorting your currency, and eventually you end up like Greece, a nation enslaved.

    Erdogan is doing the right thing, if he doesn’t accept IMF(American) deals and money, it’s western banks who lose money.

    If everybody shorted the US dollar, by buying gold, this tyranny would end.