Turkish currency implodes as diplomatic rift with US reaches new low
The Turkish lira has updated a record low against the US dollar after a delegation from Ankara left Washington without a solution to a diplomatic conflict over the arrest of an American pastor in Turkey.
The lira sank by almost 20 percent on Friday to a new low of 6.64 lira to the US dollar, heading for its worst week since 2001.
The Turkish and US governments are at odds over the detention of US evangelical pastor Andrew Brunson on terrorism charges in Turkey. A delegation from Ankara visited Washington this week to meet with officials from the US State Department and the Treasury, but no apparent solution to the crisis has been found.
Pastor Brunson, a US citizen and a Turkish resident for over two decades, was arrested on terrorism and espionage charges in connection with the failed military coup in 2016. He is facing up to 35 years in prison if found guilty of supporting the coup to overthrow President Recep Tayyip Erdogan.
Investors are also concerned about President Erdogan’s interference in affairs of the country’s central bank.
“You have some very odd politics with the president interfering with monetary policy - they are picking fights with Europe, they are picking fights with the Americans,” said Paul McNamara, an investment director at GAM London Limited, as quoted by Reuters.
Analysts say the lira will keep falling unless the central bank hikes interest rates. Raising the rates has been heavily opposed by Erdogan.
“Seems like a complete crash, so they need to act now,” said Morten Lund, a strategist at Nordea Bank AB in Copenhagen told Bloomberg. “The lira will keep falling if they don’t hike rates today.”
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