As lira falls, Turkey insists US problems temporary

Turkey’s prime minister and its economy czar both attempted on Wednesday to talk up a lira currency that has hit record lows for two days running, telling investors that a widening rift with the United States was “temporary”.

Investors have hammered the lira on worries about relations with Washington and nagging concern about pressure from President Tayyip Erdogan on the central bank. The dollar has surged some 17 percent against the currency since mid-September. Much of the worry stems from the US trial of Turkish gold trader Reza Zarrab, who is accused of violating US sanctions on Iran. Ankara has described the case as a “clear plot against Turkey”, and has accused the US prosecutors of having links to the cleric it blames for last year’s failed coup.

“Turkey and the United States are two allies, so lawyers should do their job and politicians should do theirs. Let’s never allow lawyers to harm relations between the two countries,” Prime Minister Binali Yildirim said in a speech.

“We will take every measure as the government, the central bank will take its own measures as well. These (issues) are temporary.”

Mehmet Simsek, the deputy prime minister in charge of the economy, who represents the more Western-facing wing of Erdogan’s cabinet, also attempted to calm the markets.

“There are serious fluctuations in Turkish markets recently, we need to understand this calmly, correctly and without panicking,” he said in a speech. “These are temporary, the problems with the United States and the West are temporary.”

At 1500 GMT, the lira stood at 3.9495 to the US currency, firmer on the day after hitting a record low of 3.9800.

On Tuesday, the Turkish central bank (TCMB) responded to the sell-off with emergency measures to tighten liquidity, although those have so far failed to shore up confidence. Investors say that, rather than tweaking policy, the central bank needs a straightforward rate increase. (RTRS)