Turkey doubles tariffs on some USA imports; Turkish lira rallies

Turkey's President Recep Tayyip Erdogan arrives to inaugurate the Diyanet Islamic Cultural Center in the United States in April 2016

Turkey's finance minister sparked a recovery in the lira after he addressed thousands of worldwide investors, pledging to protect beleaguered local banks and cut public spending to prevent the country defaulting on its loans.

The announcement comes after Turkish Finance Minister Berat Albayrak assured worldwide investors on Thursday that the country's banks were healthy and that Turkey would emerge "stronger" from its currency crisis. He added that deposit withdrawals by panicked investors remained low and manageable.

US Treasury Secretary Steve Mnuchin warned Thursday the United States would levy more sanctions on the troubled Turkish economy if Ankara does not soon release a jailed American pastor. The lira slipped back to settle at just 1% up on the previous day.

The currency has lost almost 40 percent against the dollar this year, driven by worries over Erdogan's growing influence on the economy and his repeated calls for lower interest rates despite high inflation.

"You now have another huge selloff in EM, which has been exacerbated by Trump's willingness to jam on more and more sanctions when countries are having trouble in the market - like adding to the sanctions on Turkey", Haidar said.

Trump prefaced Mnuchin's remarks by saying that Turkey had not been a very good friend to America. "We have other partnerships and alternative markets". He added that major corporations that have large borrowings in U.S. dollars were in a comfortable position to meet short-term liabilities.

According to the Hurriyet Daily, a significant number of importers have begun to withdraw their short and long-term orders after Turkish President Recep Tayyip Erdogan's appeal to boycott us electronic products on Tuesday.

A decree signed by President Tayyip Erdogan, doubled Turkish tariffs on passenger cars to 120 per cent, on alcoholic drinks to 140 per cent and on leaf tobacco to 60 per cent. Tariffs were also doubled on goods such as cosmetics, rice and coal.

Explaining the new tariffs, Turkish Vice-President Fuat Oktay said the rises were ordered "within the framework of reciprocity in retaliation for the conscious attacks on our economy by the U.S. administration". On Tuesday, he said Turkey would boycott US electronic products.

Meanwhile, Turkey signalled on Wednesday its readiness to open talks with the US. The FTSE rose 0.8% to 7,562 while the German Dax nudged 0.4% higher to 12,220. Ankara also wanted Washington to hand over Turkish cleric Fethullah Gulen, who lives in Pennsylvania and who Turkey suspects of plotting the coup against Erdogan.

Measures to restrict the amount of currency that can be exchanged with foreign banks were also said to be boosting the currency.

But while Mr Albayrak acknowledged the domestic challenges posed by the lira's current troubles, he told investors the current crisis was a market anomaly.

Nevertheless, Erdogan won a reprieve on Wednesday after Qatar's emir promised to invest $15 billion in the country.

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