Lira collapses, dragging European stocks down, as pound falls to 13-month low against dollar | City A.M.

The Turkish lira has fallen to a new record-low this morning, as much as 12 per cent in one day, amid the souring of diplomatic relations with the US and a deepening monetary policy crisis.

The currency, which had already fallen 40 per cent, has suffered its most dramatic day so far this year, falling as low as 6.30 lira per dollar at one point.

That’s how panic looks like. #Turkey Lira in free fall. pic.twitter.com/X53haPFNx3— Holger Zschaepitz (@Schuldensuehner) August 10, 2018

Yesterday it dropped as low as 5.5670 lira.

The currency is under pressure on multiple fronts, with no progress reported in a dispute with the US over the jailing of an American citizen over allegations, which he denies, that he supported an attempted coup in 2016.

Last night Turkish President Recep Tayyip Erdogan told supporters: “There are various campaigns being carried out. Don’t heed them.

“Don’t forget, if they have their dollars, we have our people, our God. We are working hard. Look at what we were 16 years ago and look at us now.”

Today’s declines have dragged down European shocks, with the Stoxx Europe 600 falling three per cent on its exposure to banks and miners.

The euro dropped to the weakest level in a year, while the dollar, yen and Treasuries all rallied.

“EUR/USD has broken below the recent 21 June low of 1.1509 to 1.1446 after the FT reported that the ECB was concerned about the Turkish exposure of some European banks. It looks like EUR/USD will hit our end‑September forecast of 1.1400 early,” said Richard Grace, a foreign exchange strategist with Commonwealth Bank Australia.

The pound was up 0.15 per cent against the euro but was down 0.5 per cent against the dollar, taking it to a 13-month low.

Sterling hit $1.2740 this morning, its lowest level since June 2017.

This means that the pound has shed 10 per cent of its value since April, on the back of growing fears of a Brexit no deal.