Recep Tayyip Erdogan tells Turkey to 'trust in God' as lira falls

Turkish lira plunges 13% to record low

The Turkish Lira briefly tumbled to a fresh low near 6.5 per dollar on August 10, as a deepening rift with the United States and intensifying worries about the state of the economy dragged on the currency again.

Early on Friday, the lira hit a new record low, plunging to as far as 6 per United States dollar after a Turkish delegation returned from talks in Washington on Thursday with no apparent solutions to an ongoing crisis.

President Recep Tayyip Erdogan on Thursday portrayed the currency drop as a "campaign" to harm Turkey.

Turkish President Recep Tayyip Erdogan has lashed out against a shadowy global "interest rate lobby" which he suggested was "campaigning" to harm Turkey's economy, after the lira fell more than 14 percent overnight. "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. Markets are deeply concerned over the direction of economic policy in Turkey where inflation has hit almost 16 percent while the central bank remains reluctant to raise rates in response.

US President Donald Trump wrote on Twitter late last month that his country "will impose large sanctions on Turkey for their long time detainment of Pastor Andrew Brunson". "Don't heed them", Erdogan said.

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The Turkish economy has expanded rapidly this year compared with 2017. "The fresh negative round of news started when the central bank decided not to hike the interest rates at its monetary policy meeting on 24 July - a big disappointment as the weak TRY increases inflation, which in turns weakens the lira and creates a vicious circle".

"In any case, sanctions on the Turkish banking sector would be catastrophic as Turkey is dependent on capital inflows to finance its high current account deficit".

Even Turkey's annual GDP which is around €750 billion ($860 billion) is only equivalent to 6.5 percent of the eurozone's GDP.

Furthermore, the bank sees hope in other recent crises, like the attempted coup in 2016. Erdogan said China, Mexico, Russia and India will be new markets for his country's exports. "This is one of the most important principles of the free market economy - if you lend money, you take a risk and must accept the losses".

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