Lira Drops along with Erdogan’s Challenge

Lira Drops along with Erdogan’s Challenge

Lira drops to a new level of low against the dollar as the country’s incumbent leader, President Recepp Tayyip Erdogan gave out a “provocative” comment against the United States.

The Turkish president challenged the US to impose sanctions against his country after launching and testing Russian-made S-400 missiles.

Last year, the world’s largest economy threatened economic and political punishments against its co-NATO member after the air defense missiles arrived in Turkey last year.

According to experts in the field, the Eurasian country took advantage of the on-going frenzy in Washington brought by the upcoming presidential elections in November, dimming the possibility of immediate retaliation.

Erdogan confirmed the military’s test-fire on the new ammunition last Thursday. Pentagon was quick to condemn the movement saying that this is against Turkey’s commitment as a NATO ally.

In response, the controversial president encouraged its counterpart to go ahead with its sanctions. He hinted at the call of respect for his nation’s sovereignty.

With the on-going tension, the lira traded above the psychological level for investors past 8 per dollar.

It opened the week in a gloomy tone at 8.0677 per USD at one point in the trading session. In the latest foreign exchange charts, the USD/TRY pair shed off a painful % after settling at 8.0414.

So far in the year, Ankara’s currency has lost more than a quarter of its value. Investors grow worried about Turkey’s tarnished relations with the US, Europe, and other powerful nations.

Last week, TRY shed off 1.9% to settle at 7.9594 following investors’ dismay at the central bank’s unchanged monetary policy. According to them, the move is unorthodox and confusing. 

The decline followed the rally that raised the lira’s value to a two-week high in anticipation of a hike.

Dollar Firms Against Other Currencies

With the on-going disarray in Turkey, the lira is currently considered one of the worst-performing currencies in emerging markets after Brazil’s real.

Similarly, the country has spent foreign-exchange reserves swiftly during the pandemic to keep its bleeding economy afloat.

So far in the year, investors have already sold 13.8 billion worth of Turkish equities and bonds in 2020, weighing TRY further down.

Meanwhile, the USD firms against other players in the basket of currencies after the dollar index gained 0.2% to 92.972.

EUR/USD fell by 0.2% to 1.1831, while the GBP/USD followed suit by shedding off 0.3% to 1.3004. In Asia, the USD/JPY pair gained by 0.2% to 104.88.

Rising coronavirus cases in the United States and Europe continue to weigh on investor sentiments.

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