Threat of new USA sanctions puts pressure on fragile lira

Kenny Grant
August 18, 2018

It's not clear how much more they'd be willing to contribute if the USA just keeps making things worse.

US Treasury Secretary Steven Mnuchin told Mr Trump at a cabinet meeting on Thursday that sanctions were ready to be put in place if Mr Brunson were not freed.

Turkey's Trade Minister Ruhsar Pekcan responded to the new threat on Friday.

The 50-year-old pastor, who has been living in Turkey for more than two decades, was detained two years ago and faces up to 35 years in prison if found guilty.

USA sanctions and tariffs have contributed to a tumble in the Turkish lira, which dropped in value to 5.86 to the dollar on Friday following Mnuchin's warning.

The lira, which earlier this week traded at well over seven to the dollar, held onto its gains during Albayrak's discussion, trading at 5.7 against the greenback.

"Certainly the president has a great deal of frustration on the fact that Pastor Brunson has not been released as well as the fact that other United States citizens and employees of diplomatic facilities have not been released, and we're going to continue to call on Turkey to do the right thing and release those individuals", she said.

Turkey's state-run Anadolu news agency said a high court in Izmir had upheld a lower court's decision earlier this week to keep Mr Brunson under house arrest.

The president has remained defiant, calling on Turks to sell their gold and dollars for lira, describing the crisis as an "economic war".

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Tensions between Turkey and the United States have been on the rise as Trump has pressed for the release of the pastor.

"I think they may even be a reason to join ranks".

"Both men are seeking to increase their votes by creating an enemy".

"Any conversations we have with China to come up with a deal and any conversations we have with Mexico would be seen as a win for the U.S." said Jeffrey Frankel, president at Stuart Frankel & Co in NY.

But he suggested Turkish "policymakers only really seem to have done the minimum needed".

Turkey, he said, has no plans to seek help from the International Monetary Fund or impose capital controls to stop money flowing overseas in response to the recent collapse of its lira currency.

Heavy selling in recent weeks has spread to other emerging market currencies and global stocks and deepened concerns about the economy, particularly Turkey's dependence on energy imports and whether foreign-currency debt poses a risk to banks.

Analysts say sharp hike in interest rates is needed to stop the declining value of lira, but Erdogan's government is opposed to any rate hike in order to stimulate growth.

"Turkey has been a problem for a long time".

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