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Turkey President says it will boycott US electronics as lira steadies

This article is more than 12 months old

ISTANBUL President Recep Tayyip Erdogan said yesterday that Turkey will boycott electronic products from the US, retaliating in a dispute with Washington that has driven the lira to record lows.

The lira has lost more than 40 per cent this year and crashed to an all-time low of 7.24 to the US dollar early on Monday, hit by worries over Mr Erdogan's calls for lower interest rates and worsening ties with the US.

The weakness of the Turkish currency has rippled through global markets. Its drop of as much as 18 per cent last Friday last week hit US and European stocks as investors fretted about banks' exposure to Turkey.

Yesterday, the lira recovered some ground, trading at 6.53 to the dollar, up around 5 per cent on the day.

It was supported by news of a planned conference call in which Finance Minister Berat Albayrak will seek to reassure investors concerned by Mr Erdogan's control of the economy and his resistance to interest rate hikes to tackle double-digit inflation .

Mr Erdogan says Turkey is the target of an economic war and has made repeated calls for Turks to sell their dollars and euros to shore up the national currency.

"Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together," he told members of his AK Party in a speech.

"We will impose a boycott on US electronic products. If they have iPhones, there is Samsung on the other side, and we have our own Vestel here," he said, referring to the Turkish electronic company, whose shares rose 5 per cent.

The US has imposed sanctions on two Turkish ministers over the trial of a US evangelical pastor on terrorism charges in Turkey, and last week Washington raised tariffs on Turkish metal exports.

Although the lira enjoyed a small respite yesterday, investors say measures taken by the Central Bank on Monday to ensure liquidity fail to address the root cause of lira weakness.

"What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain but without it there is just no credibility of promises to restabilise things," said Mr Craig Botham, Emerging Markets Economist at Schroders.

BONDS

Dollar-denominated bonds issued by selected Turkish banks continued to fall yesterday, although sovereign bonds steadied.

Traders said news that Mr Albayrak will hold a conference call with up to 1,000 investors to discuss the economy might also have helped support the currency.

"I think the investor call Albayrak has scheduled has helped lira firm," said TEB Investment strategist Isik Okte.

Turkey's business lobbies yesterday called for a tighter monetary policy to stabilise the lira and for diplomacy to solve US-Turkish disputes. - REUTERS

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