Published: Fri, August 10, 2018
Finance | By Loren Pratt

Turkey on the Economic Brink, Explained in a Dozen Charts

Turkey on the Economic Brink, Explained in a Dozen Charts

Earlier, it had crashed some 12 per cent through the 6.00 level for the first time in history, trading at one point at more than 6.20 lira per dollar.

The Turkish lira has updated a record low against the United States dollar after a delegation from Ankara left Washington without a solution to a diplomatic conflict over the arrest of an American pastor in Turkey.

Turkey remains at loggerheads with the United States in one of the worst spats between the two North Atlantic Treaty Organisation allies in years over the detention for the last two years of American pastor Andrew Brunson and a host of other issues. Washington imposed financial sanctions on two Turkish ministers and warned of additional measures.

A plummeting Turkish lira sent ripples through global equities and emerging markets on Friday, as rising fears of a wider fallout sent investors scurrying for the safety of assets such as the yen and US government bonds.

Turkey's benchmark one-week repo rate is now 17.75%.

After winning the election in June, he appointed his son-in-law as chief of a revamped finance ministry.

Erdogan, a self-described "enemy of interest rates", wants cheap credit from banks to fuel growth, but investors fear the economy is overheating and could be set for a hard landing.

In fact, TRY once again drops below the 6.0 mark after Erdogan said the country faces a wave of artificial financial instability.

Shares in France's BNP Paribas (BNPP.PA), Italy's UniCredit (CRDI.MI) and Spain's BBVA (BBVA.MC), the banks seen as most exposed to Turkey, fell as much as 4 percent.

"In most cases though, we suspect that this resilience will prove temporary", they said, highlighting expectations of rising USA interest rates and worries over growing USA protectionism.

Erdogan responded by announcing to freeze the assets in Turkey of USA ministers of "justice and interior", in tit-for-tat response to U.S. sanctions.

The plunge in the lira has featured remarkably little on Turkish television channels and newspapers - most of which after recent ownership changes are loyal to the government - with most media focusing instead on recent flooding by the Black Sea.

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