Turkish lira rallies after historic plunge over tensions with US

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AFP PHOTO / OZAN KOSE

The Turkish lira rallied on Tuesday after suffering its biggest daily loss in nearly 10 years in the previous session as investors eyed growing tensions between Turkey and the US while improved risk appetite boosted emerging market stocks, Reuters reported.

Relations between Turkey and the United States have deteriorated sharply over the last week with Washington imposing sanctions on two Turkish ministers over Turkey’s detention of American pastor Andrew Brunson on terrorism charges.

One Monday the lira fell some 5.5 percent against the dollar, its biggest single day drop in nearly 10 years, after the Trump administration said it was reviewing Turkey’s duty free access to US markets, a move that could affect $1.7 billion of Turkish exports.

But the currency bounced 1.5 percent on Tuesday from a record low of 5.4250 after media reports that a delegation of Turkish officials would go to Washington.

Turkey’s newly appointed deputy foreign minister, Sedat Önal, will head a delegation that will go to the United States to discuss ongoing tensions between the NATO allies, a source in the Turkish Foreign Ministry told Reuters on Tuesday.

Broadcaster CNN Türk had earlier reported that Turkey and the United States had reached pre-arrangements on certain issues and that a Turkish delegation would go to Washington in two days to discuss a row between the two countries. Turkish foreign Ministry, however, denied the report.

“We may see some stabilization for the next couple of days until we see how this rapprochement plays out,” said Jakob Christensen, head of emerging market research at Danske Bank.

“If it doesn’t produce any fruitful solutions we could see further selling given the anxieties in the market,” he continued, adding that investors would also be watching out for any possible impact from measures hitting Turkish exports to the US or any constraints on Turkish corporates’ refinancing.

Turkey’s central bank has also reduced banks’ foreign currency reserve requirements to try to stabilize the falling lira. The currency has lost more than 27 percent of its value this year.

The United States continues to be a solid friend and ally of Turkey despite ongoing tensions between the NATO allies, the US Embassy in Ankara tweeted on Tuesday, adding that the two countries had an active economic relationship.

In a tweet the Embassy also slammed Turkish media reports citing a US official saying Turkey’s lira would weaken to 7 against the dollar as “made up and baseless” after the currency hit a series of record lows on Monday on the back of trade threats from Washington and a deepening diplomatic row.

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