President Recep Tayyip Erdogan said yesterday that Turkey will boycott electronic products from the U.S., retaliating in a dispute with Washington that has driven the lira to record lows. Behind the scenes, however, diplomats resumed contact to ease tensions.
However, the rupee continued to suffer, briefly falling to a record low of 70 to the dollar as the crisis exacerbated a months-long sell-off in the Indian currency, which was already under pressure from a huge current-account deficit and higher oil prices.
There remain concerns about how the crisis will pan out, with Turkish President Recep Tayyip Erdogan in combative mood, accusing the United States of plotting against his country.
It was unclear how he meant to enforce the boycott.
The lira plunged against the dollar and other currencies in the past week, sparked by concerns over Erdogan's economic policies and a dispute with the U.S. over the detention of an American pastor, who is on trial on espionage and terror-related charges.
Behind the scenes, however, diplomatic dialogue appears to have resumed.
"The attractive rate advantage of US bonds is strengthening demand for the dollar".
The lira -which plummeted to a record low of 7.24 to the dollar at the week's start, rattling global markets- was slightly weaker at 6.415 after rebounding more than 8 percent overnight. The lira strengthened 7.1 percent to 6.3719 per United States dollar overnight.
Turkey retaliates by raising tariffs
If the Turkish government does not eventually agree to US demands and release him early, Brunson could spend 35 years in prison. President Donald Trump last week ramped up his attack on Turkey by doubling tariffs on Turkish aluminum and steel imports.
Press secretary Sarah Huckabee Sanders also criticized Turkey's move to impose tariffs on some USA goods as "regrettable and a step in the wrong direction".
But to the dismay of markets, the statement gave no clear promise of rate hikes, which is what most economists said is needed.
Attention will turn to an address on Thursday by the finance minister to foreign investors for clues on any change in economic policy. On Tuesday, he said the government is working on steps to help banks and support companies affected by the currency crisis.
Brunson was arrested and indicted on espionage and terror-related charges back in 2016 in connection with a failed military coup operation. Although he was released to home detention, he faces a prison sentence of up to 35 years if he is convicted at the end of his ongoing trial.
The dispute with the United States, focused on a tit-for-tat tariff row and Turkey's detention of Brunson, helped turn the currency's steady decline into meltdown.
On Aug. 10, Trump intensified the dispute with Turkey over its detention of a US evangelical pastor on terrorism charges by imposing higher tariffs on metal imports.
Independent economists caution it would be hard to unseat the dollar as the top reserve currency as it is used widely in the global economy, for example to trade in oil and for commercial deals. Washington has increasingly seen the policies of the Erdogan government as cutting across its drive to assert U.S. hegemony over the Eurasian landmass, and to militarily confront Iran, which it views as a principal obstacle to its domination over the Middle East.
Cavusoglu recalled Turkey's long-standing demand for lifting visa requirements for Turkish citizens travelling to Russian Federation.
"If we postpone our investments, if we convert our currency to foreign exchange because there's danger, then we will have given into the enemy", he said. And the population is growing [at the rate of] one to two [percent], so per capita, that's really not much of a gain".