Turkey has an action plan it will begin implementing on Monday morning to ease investor concerns, Finance Minister Berat Albayrak said on Sunday, after the lira plunged to a fresh record low in early Asia Pacific trade.
In an interview with Hurriyet newspaper published online, Albayrak described the lira’s weakness as “an attack”, echoing President Tayyip Erdogan – who is his father-in-law – but he said Turkey’s action plan was ready.
“From Monday morning onwards our institutions will take the necessary steps and will share the announcements with the market,” Albayrak said, without giving details on what the steps would be.
The currency of the 17th largest economy in the world, Turkey, is on the verge of absolute implosion… https://t.co/aiv3hyLM05
— Mike Dudas (@mdudas) August 12, 2018
Albayrak also said a plan has been prepared for banks and the real economy sector, including small to mid-sized businesses, which are most affected by the foreign exchange fluctuations. “We will be taking the necessary steps with our banks and banking watchdog in a speedy manner,” he said.
He has dismissed any suggestions that Turkey might intervene in dollar-denominated bank accounts, saying any seizure or conversion of those deposits into lira was out of the question.
The lira plunged to a fresh record low of 7.24 against the dollar during in Asia Pacific trade, where markets were opening for Monday morning. It pared losses after Albayrak’s comments and stood at 7.08 at 2040 GMT on Sunday, Reuters said.
The currency has lost more than 45 percent of its value this year over worries about Erdogan’s influence over the economy, his repeated calls for lower interest rates in the face of high inflation and worsening ties with the United States.
Erdogan, who has called himself the “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.
On Sunday, Erdogan lashed out at the US, threatening to find new alliances and new markets. He also took higher interest rates off the table and said Turkey wouldn’t accept an international bailout. His message was essentially the opposite of what investors have called for to stem the plunge in the markets, according to Bloomberg News.
Recep Erdogan has warned the US that #Turkey would seek new friends and allies as it looked for help to halt a full blown currency crisis that has been made worse by an intensifying row with its Nato allyhttps://t.co/Pha5t5gtQ5 pic.twitter.com/qKggLJ1xkJ
— Endi Zentarmi (@EndiZentarmi) August 12, 2018
“It’s like dumping gasoline on a fire,” Win Thin, a strategist at Brown Brothers Harriman in New York, told Bloomberg on Sunday. While tensions with the US need to be resolved, the main problem in Turkey is “a lack of market-friendly officials that have experience with markets. Policy making is too top-heavy and run by Erdogan, and he simply has no idea how markets work.”
Erdogan’s comments on interest rates – and his recent appointment of his son-in-law as finance minister – have heightened perceptions that the central bank is not independent.
On Sunday, speaking to supporters in Trabzon on the Black Sea coast, Erdogan dismissed suggestions that Turkey was in a financial crisis like those seen in Asia two decades ago.
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He said the crash of the lira, sparked by his bitter dispute with the US, was a “political plot” against Turkey and warned that Ankara would now seek new markets and partners, AFP reported.
The dispute between the two NATO allies – which reached new intensity over the detention of an American pastor in Turkey – has hammered the lira and also raised questions over the future partnership between Washington and Ankara.
All eyes will be on the lira when foreign exchange markets reopen on Monday after the weekend pause. Still, Erdogan indicated he was in no mood to offer concessions to the US, or to financial markets.
“The aim of the operation is to make Turkey surrender in all areas, from finance to politics,” Erdogan said. “We are once again facing a political, underhand plot. With God’s permission we will overcome this,” he added.