Turkish lira slumps to new record low as Donald Trump doubles tariffs

Greek lieutenant Aggelos Mitretodis and noncommissioned officer Dimitros Kouklatzis were arrested in Turkey

"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 currency's drop - 40 percent so far this year - has become a gauge of fear over a country facing the fallout of years of debt-fueled growth, worldwide concern over President Recep Tayyip Erdogan's push to amass power, and a souring in relations with allies like the U.S.

Turkey and the US are now experiencing rocky relations following Washington's imposition of sanctions on Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul for not releasing American Pastor Andrew Brunson, who faces terrorism charges in Turkey.

Erdogan said the two countries have been strategic partners and North Atlantic Treaty Organisation allies for six decades and reminded Washington that Turkey and the USA "stood shoulder to shoulder against common challenges during the Cold War and its aftermath".

Trump intensified the alarm on financial markets with a new tweet on the Turkey row.

President Tayyip Erdogan denied on Saturday that Turkey is in a currency crisis, dismissing a plunge in the lira as "fluctuations" which have nothing to do with economic fundamentals. This will be my people's response to those who have waged an economic war against us'. He urged Turkish citizens to immediately exchange their gold and dollars for lira. The lira fell further as Erdogan spoke.

The Turkish lira has fallen more than 10% against the dollar after a Turkish delegation in Washington failed to prevent United States sanctions.

The lira, which has lost more than 40 percent this year, hit a new record low after Trump took steps to punish Ankara in a wide-ranging dispute.

After winning a June election with revamped powers, Erdogan tightened his control over the central bank and appointed his son-in-law Berat Albayrak to head a newly-empowered finance ministry.

In addition to the Brunson case, Washington is seeking the release of three locally employed US embassy staff. According to a source in Erdogan's office, the two said they were pleased with the positive direction in their economic and trade ties and with the ongoing cooperation in the energy and defense sectors.

"We doubt Turkey is ready to limit its fiscal flexibility right now".

Meanwhile the cost of insuring exposure to Turkey's sovereign debt through five year credit defaults swaps has spiraled to the highest level since March 2009, topping levels seen for serial defaulter Greece, which has three bailouts in the last decade.

Turkey's currency slumped to a new record low as Donald Trump compounded the country's economic crisis by doubling steel and aluminium tariffs.

The currency drop will also increase the cost of living for people in Turkey by making imports more expensive.

Andrew Brunson, an American pastor, living in Izmir, Turkey.

Turkey's President Recep Tayyip Erdogan addresses his supporters in Bayburt, Turkey, Friday, Aug. 10, 2018.

The United States hit two high-ranking Turkish officials with sanctions after the Turkish government refused to release imprisoned Christian pastor Andrew Brunson. The U.S. exported $9.75 billion worth of goods-mostly cotton, scrap iron, steel, civilian aircraft parts, coal, and petroleum gases-to Turkey, and imported $9.42 billion worth of goods from them. Hard currency debt issued by Turkish banks suffered similar falls. The lack of central-bank action to support the currency is also spooking investors and Erdogan's previous comment that interest rates are the "mother and father of all evil" hasn't helped. Inflation increased 16 percent in July, and Erdogan has insisted that interest rates not increase.

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