Turkey currency dives to fresh low after Trump tweets new tariff rate

President
Donald Trump, accompanied by Turkish President Recep Tayyip
Erdogan, speaks in the Roosevelt Room of the White House in
Washington Tuesday, May 16, 2017.
Evan
Vucci/AP

• The Turkish lira fell as much as 17% versus the dollar
  Friday.
• Trump said he would double the steel and aluminum
  tariff rate for Turkey.
• Washington recently imposed sanctions on Ankara over
  detained Americans.
• President Recep Tayyip Erdogan called on citizens to
  convert other currencies and gold into lira.
• Watch
  the lira trade in real time here.

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Turkey’s
currency plunged to fresh all-time lows against the dollar
Friday after President Donald Trump announced in a tweet that he
would double tariffs on aluminum to 20% and on steel to
50%. 

“I have just authorized a doubling of Tariffs on Steel and
Aluminum with respect to Turkey as their currency, the Turkish
Lira, slides rapidly downward against our very strong Dollar!”
the president wrote in a tweet. “Our relations with Turkey are
not good at this time!”

The lira dropped as much as 17% against the dollar, its steepest
daily drop in nearly two decades. It has been one of the
worst-performing currencies this year but a deepening rift
between Ankara and Washington has accelerated the selloff.

A Turkish delegation returned from a meeting with Trump
administration officials in Washington on Thursday with no
apparent progress on a conflict over an American pastor who has
been detained in Turkey for nearly two years. 

Earlier this month, the Trump administration announced sanctions
against Turkey for failing to release Andrew Brunson, an
evangelical pastor who was arrested in 2016 for allegedly aiding
a failed military coup, claims the pastor denies. The sanctions
target Turkey’s minister of justice and minister of interior,
whom the White House said played leading roles in the arrest and
detention of 50-year-old Brunson. 

“It is astonishing that no matter how punished
the 
Lira
 looks, traders are
showing absolutely no indication that they are finished with
pricing in ‘bad news’ into the market,” Jameel Ahmad, head
of currency strategy and market research at FXTM, said.

During a speech in the Black Seas city of Rize overnight,
President Recep Tayyip Erdogan called on citizens to exchange
hard currencies and gold for the lira. He said the country was
facing an “economic war” and blamed the selloff on credit ratings
agencies and a shadowy “interest rate lobby,” according to
Reuters. 

Erdogan is a self-proclaimed “enemy of interest rates” and has
pushed for unorthodox policies like cutting borrowing costs in
the face of accelerating inflation. He had indicated plans
to wield more influence over the country’s central bank in the
runup to his June reelection.

Concerns about the lira seem to already be spreading to other
currencies, analysts say, including the pound and the euro.

“The issue that global investors now need to take into
consideration is that the recipe for a currency crisis in Turkey
is now presenting a risk of a contagion knock-on effect across
other markets,” Ahmad said. 

Markets Insider