U.S. TARIFFS ON TURKEY TO STAY, QATAR OFFERS ANKARA AID
While the Brunson matter appeared far from being resolved, Turkish President Tayyip Erdogan got a shot in the arm from Qatar’s Emir, who approved a package of economic projects, investments and deposits after the two met in Ankara. The Qatari money will be channeled into banks and financial markets, a Turkish government source told Reuters.
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. The lira has lost nearly 40 percent against the dollar this year, driven by worries over Erdogan’s growing control over the economy and his repeated calls for lower interest rates despite high inflation.
The dispute with the United States, focused on a tit-for-tat tariff row and Turkey’s detention of Brunson, helped turn the currency’s steady decline into meltdown. It touched a record low of 7.24 to the dollar early on August 13, rattling global stock markets and threatening the stability of Turkey’s financial sector.
President Donald Trump doubled tariffs on Turkish metals exports to the United States last week prompting Turkey, which doubled Turkish tariffs on imports of U.S. passenger cars to 120 percent, alcoholic drinks to 140 percent and leaf tobacco to 60 percent.
The White House called the Turkish response a step in the wrong direction and signaled a hard line on Brunson’s release. Despite the political tensions, the lira rebounded some 6 percent, strengthening to around 6.00 to the dollar. There was also optimism about better relations with the European Union after a Turkish court released two Greek soldiers pending trial. Foreign Minister, Mehmet Cavusoglu, said ties with the bloc, long strained, were on a firmer basis and had started normalizing.
A banking watchdog’s step to limit foreign exchange swap transactions also helped the currency. “They are squeezing lira liquidity out of the system now and pushing interest rates higher,” said Cristian Maggio, head of emerging markets strategy at TD Securities. “Rates have gone up by 10 percent...The Central Bank has not done this through a change in the benchmark rates, but they are squeezing liquidity, so the result is the same,” he said. The lira firmed as far as 5.75 against the dollar on August 15 and stood at 5.90 at 2058 GMT.
There was no resolution to the Brunson case in sight. On August 15, a court in Izmir, where Brunson is on trial, rejected his appeal to be released from house arrest. An upper court had yet to rule on the appeal, his lawyer told Reuters.