Turkey’s lira crisis threatens to undermine global economy

Turkey has 'only days' to resolve lira crisis, analysts warn

Turkey Financial Crisis: Stocks at Record Low as Lira Plunges Again

Behind the scenes, however, diplomats resumed contact to ease tensions.

The call from businesses came as Erdogan demanded a boycott of Apple and other US -made products in an effort to hurt the United States.

Another analyst cited by CNBC, Dennis Gartman, found it "dismaying" that the United States has "chosen to kick Turkey while the latter is down and suffering a severe bout of economic pain".

"We will implement a boycott against America's electronic goods", Erdogan told the conference.

It was unclear how Erdogan meant to enforce the boycott.

In imposing punitive tariffs on Turkish aluminum and steel exports, the Trump administration has broken with decades of USA emerging market crisis management. Turkey's state-run news agency and US officials say US National Security adviser John Bolton had met with the Turkish ambassador to Washington on Monday.

The move reflected a measure of confidence that the steps taken by the central bank on Monday to support the banking system may help restore stability.

It comes after the Turkish currency fell to a new low of 7.2 lira to the dollar, dragging the MSCI world equity index, which tracks shares in 47 countries, down 0.6 per cent as markets opened.

Turkish President Recep Tayyip Erdogan this morning claimed the country was under economic "siege", accusing the U.S. of trying to "stab it in the back". "Whatever we pay for from overseas, we will do here", he said.

In a joint statement issued Tuesday, the industrialists' group TUSIAD and the Union of Chambers and Commodity Exchanges called on the government to allow the central bank to raise interest rates to help overcome the currency crisis.

Despite Erdogan's rhetoric, diplomatic efforts are still under way.

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Turkey's finance minister Berat Albayrak said the central bank would start implementing an economic action plan, including cutting the lira reserve requirement ratio, a cash buffer held by banks. It also eased rules that govern how they manage their lira and foreign-currency liquidity, while the banking regulator limited swaps transactions to make shorting the currency more hard.

The tariff increases come amid Trump's concerns over an American pastor, Andrew Brunson, imprisoned in Turkey since 2016. It was not clear when the court would consider the appeal.

Brunson, 50, is being tried on espionage and terror-related charges, which he and the USA government vehemently deny. If the evangelical pastor is found guilty, he will face up to 35 years in jail.

The United States' top diplomat in Turkey, Jeffrey Hovenier, visited Brunson on Tuesday and called for his case - and those of others detained in Turkey - to be resolved "without delay" and in a "fair and transparent manner".

Russia's Foreign Minister Sergei Lavrov, who is visiting Ankara, branded the U.S. sanctions an illegitimate policy at a news conference on Tuesday.

Over a third of Turkish banks' lending is in foreign currencies, according to Reuters.

Independent economists caution it would be hard to unseat the dollar as the top reserve currency as it is used widely in the global economy, for example to trade in oil and for commercial deals.

Oil prices jumped after Saudi Arabia said it cut production, adding to concerns about global supply as USA sanctions against Iran bite its exports. "Meanwhile, the Kurds remain a reality near and within Turkey's borders; a deepening economic crisis makes it increasingly vulnerable; and its erratic regional policy makes it hard to pursue any dialogue that requires trust and steadfastness". On Tuesday Turkey announced a boycott on USA electronics in response.

"What is the reason for all this storm in a tea cup?"

The Turkish lira found some footing Tuesday morning, with its downward slide stopping for the time being.

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