Lira falls as Turkey says U.S. waging 'economic war'

ANKARA/ISTANBUL - 23 August 2018: The lira weakened on Thursday, staying under pressure as a damaging standoff between Turkey and the United States centred on the fate of a Christian pastor showed no signs of easing.

Ankara accused Washington of waging “economic war” and failing to respect its legal system over Andrew Brunson, whose trial in Turkey on terrorism charges - which he denies - has soured ties between the NATO allies.

The lira dipped 1.1 percent to 6.1000 against the dollar from a close of 6.0330.

It is down 38 percent this year, with the crisis in Turkish-U.S. relations feeding into losses triggered by concern about President Tayyip Erdogan’s influence over monetary policy.

Trade was thinner than usual and probably mainly offshore. Turkish markets closed on Monday for a week to mark the Muslim Eid al-Adha festival.

Erdogan’s spokesman told Reuters overnight that comments by President Donald Trump’s national security adviser showed the United States was targeting Turkey’s economy.

John Bolton told Reuters that Turkey had made a “big mistake” in not freeing Brunson, and was sceptical about $15 billion of investment support from Qatar, which was “utterly insufficient to have an impact on Turkey’s economy.”

“His statement is proof that the Trump administration is targeting a NATO ally as part of an economic war,” Erdogan’s spokesman Ibrahim Kalin said.

“The Trump administration has ... established that it intends to use trade, tariffs and sanctions to start a global trade war.”

The crisis could be over “instantly” if Turkey released Brunson, according to Bolton, prompting Kalin to call on Washington to respect Turkey’s judicial independence, one of Ankara’s most pointed responses yet to criticism over Brunson’s detention.

Brunson, who has lived in Turkey for two decades, has been detained for 21 months and is now under house arrest.

“RESTRICTIVE AND PUNITIVE”

Until Kalin’s statement, Turkish officials had been silent about comments on Turkey this week by Trump and Bolton. Trump told Reuters on Monday he would give no concessions in return for Brunson’s release.

As relations soured, Trump this month doubled tariffs on metal imports from Turkey, prompting Ankara to raise tariffs on U.S. car, alcohol and tobacco imports by the same amount.

Ankara has initiated a WTO dispute complaint on the tariffs.

“Turkey will protect its national interests on every platform and work with the rest of the world against restrictive and punitive measures,” Kalin said.

Qatar’s support had a positive impact on markets and Turkey’s relations with it would continue to strengthen.

“The steps we have taken to prevent an assault on the Turkish lira yielded positive results” and the Finance Ministry and other institutions would continue to “take precautions and protect our economy”, he added.

He also said Mehmet Hakan Atilla, a banker at Turkey’s state-owned Halkbank, had been unjustly convicted for taking part in a scheme to help Iran evade U.S. sanctions. Atilla was sentenced to 32 months in jail in May.

“It is unacceptable that certain baseless and false allegations are made against Halkbank to weaken this public bank,” Kalin added.

“Turkey is extremely frustrated with this process.”