Russia Backs Non-dollar Trade With Turkey

Russia Backs Non-dollar Trade With Turkey

Russia Backs Non-dollar Trade With Turkey

Despite the political tensions, the lira rebounded 6 percent on Wednesday, strengthening to about 6.0 to the dollar.

The US doubled tariffs last week over Turkey's refusal to free a US pastor who is imprisoned there.

The White House said Wednesday that Turkey's tariff hikes on United States products in retaliation for USA sanctions on Ankara were "regrettable" and again called for the immediate release of American pastor Andrew Brunson. By driving up short-term borrowing costs, this makes it less appealing for investors, like hedge funds, to borrow liras on the offshore swap market so they can bet against, or short, it.

Andrew Brunson's continued detention with charges of terrorism and espionage was cited as the basis of U.S. sanctions on two Turkish ministers on 1 August, which was followed by a doubling on 10 August of USA tariffs on Turkish steel and aluminium to 50% and 20% respectively.

"They are squeezing lira liquidity out of the system now and pushing interest rates higher", said Cristian Maggio, head of emerging markets strategy at TD Securities. That fueled a relatively high rate of economic growth-7 percent a year ago.

The promise of an investment package comes after Qatar's Emir Tamim bin Hamad Al-Thani met with President Tayyip Erdogan in Ankara and as Turkey comes to terms with a collapse in the lira amid rising tensions with North Atlantic Treaty Organisation ally the US.

But although she was released on July 16, Brunson remains under house arrest having been removed from his cell at the end of July.

Only one U.S. measure directly affects Turkey's economy: Trump's decision to increase tariffs on the import of Turkish steel and aluminum.

Tariffs on cosmetics, rice and coal were also increased.

Russia backs using national currencies, not the USA dollar, in its trade with Turkey, Russian Foreign Minister Sergei Lavrov said on Tuesday, but he made no firm commitments that would immediately help Ankara to weather its currency crisis.

Turkey's Vice President Fuat Oktay wrote on Twitter that the doubling of tariffs was done "under the principle of reciprocity", in response to America's "conscious attacks on our economy".

White House press secretary Sarah Sanders said the United States had seen "no evidence that Pastor Brunson has done anything wrong".

On Monday Erdogan, angered by what he sees as Washington's attempts to unilaterally impose its rules on global finance, said Turkey had "made advancements in our ties with Russian Federation in accordance to our benefits and interests". Turkey's exports to the United States a year ago amounted to $8.7-billion, making it Turkey's fifth-largest export market.

Turkey and the United States are now experiencing rocky relations following Washington's imposition of sanctions on Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul for not releasing Brunson.

Erdogan, rejecting economic fundamentals as the cause of lira weakness, said Turkey was the target of an economic war.

Turkish government officials are concerned, but the country's tourists have taken advantage of the plunging currency to snap up luxury goods at stores like Chanel and Louis Vuitton.

Erdogan on Tuesday said Turkey would boycott United States electronic goods like iPhones, even though he has himself been photographed repeatedly using the product himself.

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