Lira plummeting further into crisis ensures a brutal conclusion to eventful week

Mario Draghi

Mario Draghi the governor of the European Central Bank

US President Donald Trump has announced to double steel and aluminum tariffs on Turkey, saying relations between Washington and Ankara "not good" as tensions mount between the two countries.

President Donald Trump said in a tweet Friday that he would hit Turkey with additional tariffs, as their national currency continues to drop.

US President Donald Trump's "jubilation in inflicting economic hardship on its North Atlantic Treaty Organisation ally Turkey is shameful", Zarif wrote on Twitter.

Turkey delivers just 4 percent of steel mill imports, valued about $1.18 billion past year, according to the US Department of Commerce.

A "gigantic rate hike" of at least 500 basis points to calm markets and a clear commitment from the Central Bank of Turkey to support the currency could help halt the decline, Hordijk said, adding, "Another bandage to stop the lira from bleeding to death would be capital controls, but Erdogan opposes these measures". Following the tweet, Turkey responded by imposing duties on $1.8 billion in USA goods including coal and paper.

Turkish President Recep Tayyip Erdogan spoke before the nation twice on August 10, but the country's currency continued its descent, reaching about 6.4 lire per dollar, a decline of about 14.6 percent.

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The Turkish lira fell at least 13 percent Friday, as President Erdogan called for people to exchange their other forms of money to the lira.

On Friday, as the Lira plunged and the US imposed its higher sanctions on Turkey, Turkish President Erdogan and Russian President Vladimir Putin spoke on the phone.

"Turkey expects other member countries to abide by global rules", the country's trade ministry said in a statement.

The external value of the lira is not a prime concern of Mr Erdogan's core supporters, many of whom have no plans for foreign holidays and readily accept government rhetoric that economic problems are caused by outsiders seeking to weaken Turkey.

The lira has been under sustained pressure on foreign exchanges, dropping by nearly 50% against the dollar in the past 12 months.

Last week, the United States imposed sanctions on Turkey's justice minister and interior minister for not releasing US pastor Andrew Brunson.

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"It's very unfortunate that the Trump administration had to retaliate against Turkey for their continued refusal to release Pastor Brunson and other Americans being held in Turkish custody", Graham said.

Canada's main stock index also fell on Friday. Erdogan has been putting pressure on the central bank to not raise interest rates in order to keep fueling economic growth.

Then there are Turkey's worsening relations with the US. Spanish banks, in particular, are the most exposed, with over $80 billion in Turkish loans. And it is not too far away from the level at which Goldman Sachs warned Turkey's banks would run out of the extra capital they had built up as a buffer against a crisis.

It had already fallen more than 40% in the past year. Albayrak is the Turkish President Recep Tayyip Erdogan's son-in-law.

The Turkish lira fell around 16% against the U.S. dollar on the day, from $0.18 to $0.15 as of 3pm BST.

In June, the U.S. Senate passed a bill prohibiting Turkey from buying F-35 fighter jets because of Brunson's imprisonment and Turkey's purchase of Russia's S-400 air defense system. "Don't heed them. Don't forget, if they have their dollars, we have our people, our God", Erdogan said.

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The timing of Mr Trump's tweet coincided with an announcement by Turkey's Treasury and Finance Minister Berat Albayrak of the government's new economic policy which is aimed at restoring confidence in the lira.

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