- Turkey’s currency, the lira, bounced back sharply Wednesday morning, falling back below six per dollar.
- It appears that the move was triggered by the introduction of new rules by the BDDK – Turkey’s banking watchdog – designed to stop investors betting against domestic assets.
- The lira remains down more than 14% from the same time last week.
- Also Wednesday, the Turkish government doubled tariffs on some US imports including cars and alcohol.
LONDON – Turkey’s downtrodden currency, the lira, surged Wednesday morning hours after the country’s government levied significant tariffs against American goods in response to what it has called “deliberate attacks” against its economy.
About 8 a.m. BST (3 a.m. ET), the lira made a rapid and large upward movement against the dollar, briefly moving back below six to the dollar and reversing some of the big downwards moves seen over the past week.
By 5.30 p.m. BST (12.30 p.m. ET) the lira had stabilised, and was trading at roughly 6.04 to the dollar. The lira, however, remains more than 13% lower than it was at the same time last week.
It appears that the morning’s move was triggered by the introduction of new rules by the BDDK – Turkey’s banking watchdog – which, according to a Reuters report, has cut “the limit for Turkish banks’ forex swap, spot and forward transactions with foreign banks to 25 percent of a bank’s equity.” This move is designed to make it more difficult for Turkish institutions to buy and sell derivatives in foreign markets and to prevent investors betting against Turkish assets.
The appreciation of the lira also comes just hours after the Turkish government hit numerous American goods being imported to the country with punitive tariffs.
Tariffs have been doubled on goods including cars, tobacco, and alcohol, while coal, rice, and cosmetic products have also been hit by increases.
American automobiles will now be subject to a tariff of 120%, while alcohol will have a 140% tariff rate. The levy on leaf tobacco is at 60%.
“The import duties were increased on some products, under the principle of reciprocity, in response to the US administration’s deliberate attacks on our economy,” Turkish Vice President Fuat Oktay said, according to numerous translations of a tweet he sent in Turkish.
Earlier in the week, President Recep Tayyip Erdogan asked Turkish citizens to boycott the use of American technology like iPhones in response to US tariffs levied late last week.
The lira’s initial slide came amid rising tensions between the US and Erdogan over trade. US President Donald Trump authorized increased tariffs against Turkey on Friday in response to Turkey’s unwillingness to release an American evangelical pastor, Andrew Brunson.
Erdogan exacerbated problems with the currency Friday when he urged citizens to sell dollars and gold in exchange for lira. He doubled down over the weekend, saying there was a “currency plot” against Turkey and arguing that the fall in the lira was not connected to economic fundamentals.