Turkish Lira Strengthens While US-Turkish Conflict Spirals

The Turkish lira gained slightly against the dollar as markets reopened after the weekend. After a new round of the US-Sino trade war investors refocused on a bitter dispute between Ankara and Washington over an American pastor being tried in Turkey. The lira, which has weakened 37 % against the U.S. currency this year, firmed to 5.9905 from Friday’s close.

The slide has been driven by investor concerns over President Tayyip Erdogan’s grip on monetary policy and the standoff with Washington over the fate of pastor Andrew Brunson. He is being tried in Turkey against terrorism charges. Erdogan has cast the lira slide as the result of an “economic war” against Turkey. Earlier U.S. President Donald Trump ruled out concessions to Ankara in return for Brunson’s release.

Trump’s national security adviser, John Bolton, said Ankara had made a “big mistake” by not freeing Brunson. He also voiced scepticism about Qatar’s offer of $15 billion in investment support for Turkey. Experts say, that a banking sector is especially vulnerable in this situation. If a large enough number of Turkish banks and businesses folded over in a couple of years, the economic consequences would quickly spill beyond Turkey’s borders.