Published: Fri, August 17, 2018
Markets | By Josh Butler

Turkey fires back with tariffs on US cars, alcohol, cosmetics

Turkey fires back with tariffs on US cars, alcohol, cosmetics

The Russian foreign minister claims that the US increased use of sanctions will erode the dollar's role as the top reserve currency.

Tension has grown after weeks of the conflict over the detention of USA pastor Andrew Brunson and sanctions related to his arrest, a crisis that's sacked the Turkish lira.

"Nonetheless, Turkey's troubles are a further headwind for the euro and are not good news for EM assets either".

Lavrov says that Washington's policies will undermine the dollar's position as the worldwide reserve currency of choice.

"I don't believe it's all over", said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California. -China trade talks offset by an end-of-week wobble in emerging markets as the Turkish lira's recovery ran out of steam.

Tweeting on Thursday, Trump says: "Turkey has taken advantage of the United States for many years" and is criticizing the country for "holding our wonderful Christian Pastor".

On Wednesday, a court in Izmir, where Brunson is on trial, rejected his appeal to be released from house arrest. It was not clear when the court would consider the appeal.

Tuesday night, Turkey announced new tariffs against the United States, the latest in the mounting tit-for-tat between the long-time allies. The United States slapped financial sanctions on two Turkish ministers and doubled steel and aluminum tariffs on Turkey over his continued detention.

"We have put sanctions on several of their cabinet members", Treasury Secretary Steve Mnuchin told President Donald Trump in a cabinet meeting attended by the press.

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It was unclear how Erdogan meant to enforce the boycott.

An official at a Japanese bank warned that uncertainties over Turkey continue to cap the dollar's topside, though the lira's tumble has come to a halt.

The lira has clawed back some ground over the last two days - after losing nearly a quarter of its value on Friday and Monday - but economists are warning that Turkey must urgently address its economic imbalances to avoid more troubles ahead.

Mr Erdogan has said Turkey is the target of an economic war, and has made repeated calls for Turks to sell their dollars and euros to shore up the national currency. They also called for a boycott of American brands. He also noted that the government is working to reduce inflation.

USA stocks and emerging market currencies rebounded on Thursday after China said it will hold trade talks with the United States later in August and Turkey's lira continued its recovery.

MSCI's emerging market currency index.MIEM00000CUS hit its lowest level since May 2017 on Wednesday as many major emerging currencies extended their selloff in the wake of Turkey's currency crisis. Hours later Turkey's President, Recep Tayyip Erdoğan, issued retaliatory tariffs on the United States.

The yuan last stood at 6.8672 per dollar, off Wednesday's 19-month low of 6.9587.

Spot gold prices bounced from 19-month lows on Thursday, as the us dollar slipped on news that China and the United States will hold trade talks this month, although sentiment remained negative.

Lending to these countries may suffer, but most are unlikely to experience a full blown currency crisis like Turkey.

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