As Turkey Crisis Mounts, Contagion Jitters Hit Global Banks

The euro has dropped today after the Turkish lira ad Russian rouble plummeted

The euro has dropped today after the Turkish lira ad Russian rouble plummeted

But the souring in U.S. -Turkey relations could give new strength to Russia-Turkey ties, already a source of concern among Turkey's Western allies.

Trump said the tariffs on aluminum imports would be increased to 20 per cent and those on steel to 50 per cent as the Turkish Lira "slides rapidly downward against our very strong Dollar!"

"As he stated, the president has authorized the preparation of documents to raise tariffs on imports of steel and aluminum from Turkey", White House Deputy Press Secretary Lindsay Walters said.

"A US-induced crisis in Turkey will create a new martyr in the region, with far-reaching consequences which American congressmen and President Trump do not foresee", Bulent Gultekin, a professor at the Wharton School of the University of Pennsylvania and the former Turkish Central Bank governor, told MEE.

Since then, its relationship with Turkey, the sixth largest steel importer to the United States, has deteriorated, prompting Ankara to send a delegation this week to Washington to meet with both the State and Treasury Departments.

Erdogan, who says a shadowy "interest rate lobby" and Western credit ratings agencies are attempting to undermine Turkey's economy, said Turks should exchange their gold and dollars into lira to help the currency.

"Turkish markets continue to spiral downwards with the lira now in a full blown currency crisis. i nvestor confidence in President Erdogan's regime has been waning for much of the past year but key cabinet changes made after the June 24th elections have been particularly damaging for sentiment".

Erdogan on Thursday portrayed the run on his currency as a "campaign" to harm Turkey and called on people not to worry.

Erdogan and his newly appointed finance minister, Berat Albayrak, are due to speak at 2 p.m. local time Friday. "Turkey has been trending towards authoritarianism & becoming more anti-American".

Amid a steep drop in Turkey's currency, the Lira, the president announced on Twitter Friday that he has given the greenlight to sharply increased tariffs.

The Turkish lira fell around 16% against the United States dollar on the day, from $0.18 to $0.15 as of 3pm BST. That turned into a rout on Friday, with the lira diving more than 18 percent on the day and more than 40 percent this year to a new record low after Trump took steps to punish Turkey in a wide-ranging dispute.

European shares fell on Friday as a dramatic fall in the Turkish lira jolted markets, with banks such as Spain's BBVA and Italy's UniCredit hit by worries over their exposure to Turkey. The White House said he had authorized them under asection of USA trade law that allows for tariffs on nationalsecurity grounds. It has fallen more than 46% in the past year. But some investors fear the Turkish economy is growing too quickly and could face problems.

Markets are deeply concerned over the direction of domestic economic policy under Erdogan with inflation at almost 16 per cent but the central bank reluctant to raise rates in response.

The meetings came as Turkey seeks to stanch an economic meltdown amid fallout from US sanctions imposed last week over the continued detention of the pastor, Andrew Brunson, who was jailed on espionage and terrorism suspicions more than two years ago and recently released to house arrest.

Such factors could lead regulators to ask a bank like UniCredit - which is exposed to both Turkey and Russian Federation - to set aside more capital against those risks, Credit Suisse Group AG analysts led by Carlo Tommaselli said in a note.

"Our relations with Turkey are not good at this time!" he added.

But Aykan Erdemir, of the Foundation for Defense of Democracies, said Mr Trump's tariffs announcement comes "at the worst possible time for Mr Erdogan" and fits with USA strategy to increase pressure on Ankara until Mr Brunson is released. His comments on interest rates - and his recent appointment of his son-in-law as finance minister - have heightened perceptions that the central bank is not independent.

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