Erdoğan says Turkey will boycott US electronic products

On the brink of a full-blown currency crisis, Turkey’s lira plunged to a record low Friday, tumbling as much as 18 percent in its biggest daily drop since 2001.

Last week, US President Donald Trump ramped up his attack on Turkey by raising USA tariffs on Turkish aluminum and steel imports to 20 percent and 50 percent, respectively.

USA stocks were lower Monday but the contagion from the economic crisis in Turkey remained largely confined to emerging-market assets.

He has threatened to seek new alliances – a veiled hint at closer ties with Russian Federation – and warned of drastic measures if businesses withdraw foreign currency from banks.

“With God’s permission we will overcome this”, he says.

“What is the reason for all this storm in a tea cup?” he said.”There is no economic reason for this”. There is no economic reason. Analysts have interpreted this as a call for support from Turkey’s allies in the Middle East, including Qatar.

President Erdogan addressed ruling party members in Trabzon on Sunday and urged businesses not to pull out foreign currencies from banks.

“I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars”, he said. “You should know that to keep this nation standing.is the manufacturers’ duty”.

“The plunge in the lira, which began in May, now looks certain to push the Turkish economy into recession, and it may well trigger a banking crisis”, Andrew Kenningham, chief global economist at Capital Economics, told Reuters.

The Indian rupee slid to an all-time trough, while the Indonesian rupiah hit its lowest in nearly three years, prompting intervention from the country’s central bank.

But there are other factors weighing down the lira.

Turkey scrambled a delegation to Washington last week to stave off the crisis but no deal has been reached.

Turkey’s Capital Markets Board (SPK) and financial crime board have also said they would take legal steps against those who spread misinformation about financial institutions and firms, or reports that the government would seize foreign-currency deposits. For the past two years, Turkey has been demanding that the United States extradite Fethullah Gulen, a Turkish cleric accused by Ankara of orchestrating the coup. The US has responded by slapping financial sanctions on two ministers and later doubled steel and aluminum tariffs on Turkey.

What are officials doing about it?

At issue is the Central Bank’s refusal to raise interest rates in order to tackle double-digit inflation, with Erdogan believing that interest rates are the number one killer of the economy.

Erdogan’s comments on interest rates, along with his recent appointment of his son in law, Albayrak, as finance minister have intensified concerns the central bank is not independent. Mr Erdogan favours lowering borrowing costs to fuel credit growth and economic expansion.

CONTAGION FEARS: Emerging markets are falling out of favor due to problems in Turkey and Argentina. The lira shed another 8% to below 7 per dollar after a double-digit percentage slide Friday.

“But the euro’s fall on worries about European banks’ exposure to Turkey seems a bit over done, considering that their scale is not that huge”, he added.

“Some close the doors and some others open new ones”, added Erdogan, who has built closer ties over the last few years with countries from Latin America, Africa and Asia.

Investors are now fretting over potential economic contagion.

India’s rupee has fallen to a record low as Turkey’s currency crisis continues to rock global emerging markets.