Turkish lira weakens to 5.86, US warns of more sanctions

Christian Charisius  Reuters

Christian Charisius Reuters

The Turkish court once again denied another appeal for Pastor Andrew's release from house arrest and the removal of the travel ban against him. The row is likely to escalate in the coming days after a court in the Turkish city of Izmir chose to reject an appeal for release by Mr Brunson.

Brunson, an evangelical Christian pastor originally from North Carolina but a longtime resident of Turkey, was accused by the Turkish government of terrorist involvement and playing a role in the Turkish military's 2016 attempted coup to overthrow the government.

The Turkish lira weakened to 5.86 against the dollar on Friday from its previous close of 5.8150 as investors weighed up a United States warning that Turkey should expect more economic sanctions unless it hands over detained American pastor Andrew Brunson. "He's not a spy".

Investors rattled by events in China, Turkey and South Africa have pulled US$1.3 billion from emerging market stocks in the last week and US$100 million from emerging bonds according to the Institute of International Finance, which tracks financial flows.

The U.S. says it may impose more sanctions against Turkey, as the diplomatic rift between the two countries deepens.

The Turkish finance minister and his French counterpart on Friday agreed over the phone to conduct a joint action against USA sanctions targeting Turkey, according to the ministerial sources. The feud over Brunson, who was detained in October 2016, has added to the jitters over an economy that grew quickly, with the help of heavy borrowing, in past years.

Trump tweeted on August 10 that he has authorized a doubling of tariffs on Turkish steel and aluminum imports as their currency Lira slides rapidly downward against the USA dollar.

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A Trump tweet last week announcing a doubling of aluminum and steel tariffs for Turkey triggered the rout in the currency markets.

Turkey, in turn, criticized the prosecution in the US of Mehmet Hakan Atilla, a top official at Turkey's state-controlled Halkbank who was convicted of helping Iran avoid USA sanctions.

"They should have given him back a long time ago, and Turkey has in my opinion acted very, very badly", Trump told reporters at the White House, referring to Brunson.

"Because of the currency crisis in Turkey, investors are shifting funds from emerging markets to developed markets", said Shuji Shirota, head of macroeconomic strategy at HSBC Securities in Tokyo. "They can't take our people".

The lira gained some support from the announcement late on Wednesday of a Qatari pledge to invest $15 billion in Turkey.

U.S. President Donald Trump has repeatedly pressed Ankara to release Brunson, whom he describes as a "great patriot" who is being held "hostage". Ankara also wanted Washington to hand over Turkish cleric Fethullah Gulen, who lives in Pennsylvania and who Turkey suspects of plotting the coup against Mr Erdogan.

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