Turkey won't change its course due to outer economic pressure - Erdogan

Sunday, 19 Aug, 2018

The defiant leader hit out a day after ratings agencies Moody's and Standard & Poor's downgraded Turkey closer to junk status amid the currency crisis.

The Turkish currency fell again on Friday, breaking a three-day quiet spell in the country currency crisis, after the United States threatened to impose new sanctions on the North Atlantic Treaty Organisation country.

Turkish diplomats are reportedly close to releasing a United States pastor at the center of a diplomatic spat between Turkey and the US.

Escalating tensions on trade between the United States and some of its largest trading partners had driven traders to sell emerging market currencies and take to the safety of the USA currency. "Turkey would do well not to test @POTUS Trump's resolve to see Americans who are wrongfully imprisoned in foreign lands returned home to the United States", vice-president Mike Pence said in a tweet.

The Turkish lira stood at 5.80 per dollar on Friday, up about 0.4 percent against the dollar.

Turkish Foreign Minister Mevlut Cavusoglu struck a somewhat conciliatory note, saying Turkey was ready to discuss its issues with the United States as long as there are no threats. "Would the amount of Turkey's debts decrease?"

Turkey's banking watchdog has taken steps to stabilize the currency, limiting futures transactions for offshore investors and lowering limits on swap transactions.

It said: "The downgrade reflects our expectation that the extreme volatility of the Turkish lira and the resulting projected sharp balance of payments adjustment will undermine Turkey's economy".

Samantha Lee  Business Insider
Samantha Lee Business Insider

Turkey and its firms face repayments of almost US$3.8 billion (S$5.2 billion) on foreign currency bonds in October, Societe General has calculated.

It estimates Turkey's short-term external debt at $180 billion and total external debt at $460 billion - the highest in emerging markets.

The downgrade was triggered by what it described as a further weakening of Turkey's public institutions and a related reduction in the predictability of Turkish policymaking, Moody's said.

Albayrak, Erdogan's son-in-law, told investors on Thursday that Turkey would emerge stronger from the currency crisis, insisting its banks were healthy and signaling it could ride out the dispute with Washington.

Turkey's finance chief tried to reassure thousands of global investors on a conference call on Thursday, in which he pledged to fix the economic troubles. Turkey is dependent on imports, priced in hard currency, for nearly all of its energy needs.

"They have invested a lot of pressure into the release of Brunson, given the importance of the midterm elections in the US".

But he suggested Turkish "policymakers only really seem to have done the minimum needed".

The move by Turkey's Gulf ally offered further support to a lira rally after the Turkish central bank tightened liquidity and curbed selling of the currency.

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