Turkey lira PLUNGES after Trump vows to punish Erdogan over Russia missile purchase
TURKEY saw its lira weaken after it emerged the United States was poised to punish President Recep Tayyip Erdogan with crippling sanctions over his missile purchase from Russia.
Ankara and Washington are locked in an increasingly bitter spat after the purchase of S-400 missile systems, expected to arrive in Turkey as early as next month. The US has upped the pressure against Turkey by warning it could trigger sanctions that could target Turkish defence companies. The action would come under CATSAA, a law calling for action against countries procuring military equipment from Russia, according to Bloomberg. Turkish lira stood at 5.8585 against the US dollar at 9.13am BST, plunging in value from Tuesday’s close of 5.8265.
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It weakened as far as 5.9250 earlier this morning.
The most severe package under discussion would target several companies in Turkey’s defence sector with sanctions that would effectively sever them from the US financial system.
This would effectively make it almost impossible for them to buy American components or sell their products in the United States.
A treasury desk trader at one bank said: “We see negative newsflow this morning.
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News that new sanctions are being assessed created selling pressure on the lira
“News that new sanctions are being assessed created selling pressure on the lira.
“We can’t say the impact is that great because no concrete step is expected before the Trump-Erdogan talks.
“But in the period ahead, relations with the US will remain the main topic on the market’s agenda.”
The dispute between the NATO allies has set investors on edge, sending the lira down nearly 10 percent against US dollar so far this year.
A currency crisis last year tipped economy into recession.
The S-400s are not compatible with NATO’s defence systems and Washington says they would compromise its F-35 fighter jets.
Ankara has repeatedly said that it will not back down from its Russian order adding that it will “take reciprocal steps” if the US imposes sanctions.
President Erdogan could be set for an awkward encounter with US leader Donald Trump at the G20 summit in Japan next week.
A senior Turkish official also claimed President Trump had been invited to Turkey for a face-to-face meeting.
The official told Reuters: “We are working on the calendar now.
“We have some positive signals but the time has not been scheduled yet.
“They may meet on the margins of G20 in Japan as well.
“For a bilateral visit, we are waiting for an exact date.”
