The Turkish currency, lira tumbled over 16 percent to new record lows against the dollar on Friday as strains with the United States intensified.
A defiant President Recep Tayyip Erdogan proclaimed Turkey would emerge victorious in an “economic war” with the United States as President Donald Trump doubled steel and aluminium tariffs on Turkey.
The lira’s plunge is one of the most serious economic crises that Erdogan has faced since coming to power in 2003 in the wake of a financial crisis in 2001 that brought the economy to near meltdown.
The currency turbulence coincides with the most bitter dispute with the United States since the 1974 Turkish invasion of Cyprus, which so far shows no sign of abating.
Fears over contagion even pushed global equity markets lower, with some European banks coming under heavy selling pressure due to their exposure to Turkey.
The lira was trading at 6.4 to the dollar at 1600 GMT, a loss on the day of 16.4 percent. Earlier it had fallen as much as 22 percent.
“The Turkish Lira is in a state of crisis, as a result of investor confidence in Turkish assets remaining at alarmingly low levels,” said Jameel Ahmad, Global Head of Currency Strategy & at FXTM.
But Erdogan, who had remained unusually silent until now as the lira crisis mounted, urged Turks to take matters into their own hands.
“If you have dollars, euros or gold under your pillow, go to banks to exchange them for Turkish lira. It is a national fight,” he said.
“This will be the response to those who have declared an economic war,” he said, blaming Turkey’s woes on what he described as an “interest rate lobby” seeking to push the country to higher rates.
Erdogan had raised eyebrows Thursday when he appeared to invoke divine intervention, saying: “If they have dollars, we have our people, we have our right and we have Allah!”
Turkey remains at loggerheads with the United States over the detention for the last two years of American pastor Andrew Brunson and a host of other issues.
Trump intensified the alarm on financial markets with a new tweet on the Turkey row.
“I have just authorised a doubling of tariffs on Steel and Aluminium with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar!” Trump said on Twitter.
“Our relations with Turkey are not good at this time!”
But Erdogan said Turks should not be alarmed by exchange rate movements. “The dollar, the mollar, will not cut our path,” said Erdogan, adding Turkey had alternatives “from Iran, to Russia, to China and some European countries”.
Erdogan also Friday held telephone talks with Russian President Vladimir Putin, discussing economic and trade issues as well as the Syria crisis, the Turkish presidency said.