Pakistan reiterates ‘strong support’ for Turkey after United States sanctions

Global markets skidded on Friday as investors anxious that financial distress in Turkey could affect the worldwide banking system and the broader economy. The fear is of a full-blown emerging market crisis.

Speaking of “an economic war” Erdogan calls on Turks to support their struggling currency by exchanging any foreign money they hold for Turkish lira. “This is called carrying out an operation against Turkey”, he said.

Finance Minister Berat Albayrak said in a Sunday interview with local media outlet Hurriyet that Ankara has a plan to save the lira without specifying details.

The lira has lost more than 45 percent of its value this year. Total issuance is expected to top 90 billion yuan (US$14 billion) in 2018, according to a January forecast by JPMorgan Chase, recovering from last year’s 40 per cent slump to 71 billion yuan and a far cry from the record 116 billion yuan record in 2016. “Do not take a stance saying, “We are bankrupt, we are done, we should guarantee ourselves.’ If you do that, that would be wrong”. Two merchants at the bazaar committed suicide in the past week alone, he said.

“I am specifically addressing our manufacturers: Do not rush to the banks to buy dollars”.

“A normalisation of relations with the United States could also reduce the amount of legwork that the central bank will have to do to control the economic situation, but this is unlikely to happen at the moment”, she added.

That appointment also unnerved global investors, who were used to dealing with steady hands on the economy even as Mr Erdogan’s personal pronouncements became increasingly unpredictable and further outside the mainstream.

Erdogan reiterated on Monday his view that the currency’s crash had no economic basis, saying that USA sanctions imposed on Turkey over the terrorism trial of the pastor, Andrew Brunson, represented a “stab in the back” by a North Atlantic Treaty Organisation ally.

It is not clear if this comes after Mr Erdogan’s pressure.

They said that could be the first step toward tightening policy via an interest rate corridor, an instrument used in previous years, rather than increasing the benchmark rate.

Other countries have also been hit to an extent, such as Indonesia and Argentina, both of which have relatively high levels of household, corporate and government debt denominated in foreign currencies. The lack of interest-rate action has coincided with a marked worsening of Turkey’s relations with the US.

A look at the day ahead from EMEA markets editor Mike Dolan. Still, Erdogan indicated he was in no mood to offer concessions to the U.S., or to financial markets.

Outside those five banks, he said, European exposure is “minimal”. The use of fringe tools is unlikely to be a “game changer” for the lira, Global Securities analysts including Research Director Sertan Kargin said in an emailed report.

The Russian rouble hit its lowest level since early 2016, under pressure from the lira’s slide and investors’ concerns about new US sanctions against Russia.

“They tell us to release the priest by Wednesday 6:00 p.m., otherwise the sanctions will begin”, said Erdogan, adding Turkey was not a country to agree to such requests.

“If you come at us with your dollars we will try to find other ways to manage our affairs”.

He was interrupted by an eavesdropper from across the way.

Erdogan vowed also in Trabzon there would be no easing of the law in Brunson’s case, said that the United States tried to “give us ultimatums and deadlines to free the priest”. “Since you all want a caliphate, bring it on and let’s all just relax about it”.