Lira continues decline as emerging market currencies struggle
The Turkish lira has continued to decline today as it fell almost five per cent to 6.78 against the dollar.
It is the fourth day of decline in a row for the currency, which has lost almost 40 per cent of its value against the dollar this year, as neither Washington nor Ankara backs down over a crisis over Turkey's detention of evangelical Christian pastor Andrew Brunson.
Read more: Turkish lira slumps further after banks downgraded
President Tayyip Erdogan and US President Donald Trump have doubled down on rhetoric over the crisis, even while the lira drags other currencies down with it.
"They want to put pressure on us by using the economy," Erdogan said at an awards ceremony late on Wednesday, according to the newswire Anadolu Agency.
"It is impossible for us to step back with such threats."
The latest drop means the lira has lost almost 11 per cent of its value this week, with today's dive attributed to more investors selling off the currency following the end of the Eid al-Adha Islamic holiday.
The lira's contagion has spread to other emerging market currencies, including the South African rand and Argentina's peso, which hit a record low of 34.00 against the US dollar this morning.
Argentina has asked the International Monetary Fund for the early release of a $50bn (£38.5bn) credit line.
"I would keep a very close eye on the situation with the currencies of Argentina and Turkey because it represents a major risk to deterring traders away from investing in any high-yielding assets, meaning that the situation for the South African rand could get a lot worse due to external headwinds," said Lukman Otunuga, research analyst at broker Forextime.
Critics have blamed Erdogan's monetary policy for exacerbating the problems created by US sanctions, claiming he has too much influence over the central bank and is pressuring it not to raise interest rates, while pointing out that his son-in-law serves as the finance minister.
Mihir Kapadia, founder of Sun Global Investments, said: "Investors are waiting on further developments on the country’s inflation plans before reacting to the markets. Many other emerging market currencies such as the South African rand and the Indian rupee have also come under pressure.”
Yesterday Germany removed a golden statue of Erdogan from a square in Wiesbaden, where it was daubed with graffiti, including the phrase 'Turkish Hitler', after it went on display on Monday, Reuters reported.
Read more: Argentina calls for early release of $50bn IMF support as crisis deepens