The Turkish lira sank to another record low on Monday when Turkish President Recep Tayyip Erdogan called on the Turks to boycott French products, adding to a growing list of geopolitical disputes raising investor concerns.
The Turkish lira weakened to a record low past 8.05 against the US dollar on Monday, hit by mounting geopolitical concerns and continuing investor unease over the central bank’s decision last week to keep borrowing costs stable. .
On Monday, Turkish President Recep Tayyip Erdogan called on the Turks to boycott French products. The comments came in the wake of fierce personal criticism of French President Emmanuel Macron unleashed by Erdogan over the weekend.
Erdogan said Macron has a problem with Muslims and needed mental controls, a reprimand that prompted France to withdraw its ambassador from Ankara.
The latest rift between Turkey and France was sparked by the gruesome murder last week of teacher Samuel Paty, 47, who was beheaded near his school in a Paris suburb after showing cartoons of the Prophet Muhammad in a class on freedom of freedom. expression. Muslims believe that any description of the prophet is blasphemous.
Earlier this month, Macron had described Islam as a religion “in crisis.”
Rising tensions with France add to a growing list of geopolitical concerns weighing on the lira, including strained relations between Ankara and Washington, a dispute between Turkey and Greece over maritime rights and the conflict in Nagorno-Karabakh.
The lira weakened more than 1 percent to 8.0670 from a close of 7.9650 on Friday and was the worst performer among its emerging market peers. It has lost 26 percent of its value this year and more than half since the end of 2017.
“The growing geopolitical tensions with the US and the EU are new sources of pressure weakening the lira. The other main elements are the questioning of the credibility of monetary policy and the adequacy of the yield of the lira, “said a currency trader at a local bank.
The central bank left its key rate at 10.25 percent on Thursday and raised its late liquidity window to 14.75 percent, saying a significant adjustment in financial conditions had already been achieved after measures to contain risks. inflation.
It was expected to increase its policy rate by 1.75 percentage points amid the weak lira caused by concerns about inflation and the central bank’s heavily depleted foreign exchange reserves.
The market’s attention is now focused on Turkish Finance Minister Berat Albayrak’s participation in Citibank’s talks with investors on Tuesday and the central bank’s quarterly inflation report on Wednesday.
The lira also hit a record low above 9.5 against the euro. Turkey’s dollar-denominated government bonds fell to 1.4 cents. Istanbul’s main stock index fell 1.2 percent.
President Erdogan confirmed on Friday that Turkey had tested Russian S-400 air defense systems, which Washington says compromise NATO defenses. He has threatened sanctions and last week’s test sparked a furious response from the Pentagon and the State Department.
But Erdogan took a defiant tone on the sanctions issue on Sunday, saying in a speech: “You don’t know who you’re dancing with. Whatever the penalties, don’t be late. Do it.”
Separately, Turkey extended a seismic survey of a ship in a disputed area of the eastern Mediterranean until November 4, a move that Greece condemned on Sunday as “illegal,” reviving tensions among NATO members.
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