The lira has fallen about 40 percent against the dollar this year. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.
U.S. President Donald Trump said on Friday he had authorised higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminium and 50 percent one on steel, as tensions rose between the two North Atlantic Treaty Organisation allies over Ankara's detention of an evangelical pastor and other diplomatic issues.
Bank shares across Europe fell and the euro slipped to its lowest since July 2017 as the Financial Times quoted sources as saying the European Central Bank was concerned about European lenders' exposure to Turkey. Furthermore, consternation in the U.S. Congress has led to a nascent bill that could limit Turkey's ability to obtain loans from any U.S. -based financial institutions.
The Washington Post newspaper said the US administration was doing everything to strengthen its hand in the Brunson case, but the decision would do nothing but cause more problems for bilateral relations.
It fell to a record low this morning, and has now dropped 18 per cent today to 6.5 lira to the dollar, compared with 5.5 lira last night, as a deepening monetary crisis and diplomatic relations with the USA deteriorated.
The dollar rose as exposure to Turkey could impact European banks and spark a domino effect throughout Europe as people begin to pull out of those banks and into the US, said Gregan Anderson, macroeconomic strategist at brokerage Bulltick LLC.
Mr Erdogan has linked Gulen's fate to that of American Christian pastor Andrew Brunson, who is on trial in Turkey on terrorism charges for allegedly supporting a group that Ankara blames for the failed coup.
"Those who have dollars, euros or gold under their pillows should go and exchange them into [Turkish] lira".
Mr Erdogan also remained defiant, as he urged the Turkish people to exchange foreign currency or gold for lira. The fall has come as Turkish President Recep Tayyip Erdogan has moved to take greater control of monetary policy.More news: Freeland waiting on Saudi
Emerging market currencies are ending the week with a brutal sea of red across the board, with consistent losses throughout Asia, while the South African rand and Turkish lira are leading the way with losses within the EMEA.
Meanwhile, new Treasury and Finance Minister Berat Albayrak, also the president's son-in-law, previewed a new economic program for the country. "It is a national fight", he told a crowd in the northeastern city of Bayburt. "I am afraid there will be a bank run in Turkey, people rushing to withdraw their deposits". This is a national struggle.
"Confidence needs to be regained".
Some economists were less impressed by the government's handling of the crisis.
Turkey's sovereign dollar-denominated bonds tumbled with many issues trading at record lows. In response, the currency renewed its sell-off. Hard currency debt issued by Turkish banks suffered similar falls.
The lira's relentless depreciation drives up the cost of imported goods from fuel to food for ordinary Turks. The economic options include a central bank intervention by raising interest rates, although this would have a temporary effect, and Erdogan is famously hesitant to raise rates.
The report said the situation is not yet seen as "critical" but Spain's BBVA, Italy's UniCredit and France's BNP Paribas are regarded as particularly exposed.