Economy

Turkey crisis: Erdogan vows to boycott U.S. electronics

Turkey crisis: Erdogan vows to boycott U.S. electronics

After the USA imposed sanctions on two Turkish ministers and amid growing domestic pressure from businesses and banks to contain a currency crisis, Erdogan said he wouldn't back down in the face of the economic attack against his country.

The currency has lost about a quarter of its value against the dollar since the U.S. spat with President Recep Tayyip Erdogan's government over the continued detention of an American pastor worsened last week.

USA electronics like the iPhone may be banned in Turkey after the country's president declared a boycott Tuesday.

The sanctions caused market turmoil, which the central bank attempted - but failed - to soothe with a series of market-boosting measures.

"They don't hesitate to use the economy as a weapon", the president commented, referring to the US.

The lira plunged to a fresh record low of 7.24 against the dollar during in Asia Pacific trade, where markets were opening for Monday morning.

The United States and Turkey are in disagreement over the Syria conflict and over the fate of Turkish preacher Fethullah Gulen, who is in exile in the USA and whose extradition Ankara has requested over his alleged role in the failed July 2016 coup.

The dispute centres on Turkey's refusal to release United States pastor Andrew Brunson.

Brunson, who has lived in Turkey for 20 years and has been detained since October 2016, is accused of assisting Gulen's network and the outlawed Kurdistan Workers Party (PKK).

However one month after the elections, the bank dashed market expectations by leaving rates unchanged and has steadfastly refused to heed calls for an emergency hike.

Mr Erdogan has also been getting closer to Russian Federation.

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He noted that the USA has punished its own allies, an apparent reference to Turkey that recently faced US sanctions over the continued detention of an American pastor on espionage and terror-related charges.

"Investors remained fearful on Monday over the Turkish lira's precipitous plunge - and the concerns that a financial crisis in the country would ripple through the rest of Europe", Spreadex analyst Connor Campbell said.

Turkey's stock market has also fallen 17 percent, while government borrowing costs have risen to 18 percent a year. Meanwhile, inflation has hit 15%.

European shares also bounced back after two days of selling as anxieties over contagion from the Turkish currency crisis eased.

Over a third of Turkish banks' lending is in foreign currencies, according to Reuters.

Experts said that despite a slight rebound in the lira's value yesterday, following support from Turkey's central bank, further falls could follow, making holidays even cheaper.

Investors globally fear the damage spreading and have been prompted to sell riskier assets, including other emerging market currencies.

What are Turkish officials doing about the lira?

The Turkish central bank vowed on Monday to provide banks with "all the liquidity they need".

But the bank did not increase interest rates, which would help contain inflation while supporting the lira.

It's not clear from the speech quite what this boycott could entail - whether it's Erdogan encouraging people to buy non-American devices or whether this will be a full-on ban on imports. It also indicated it would lend money at interest rates above prevailing market rates, an effective tightening of monetary policy.