Turkey’s downtrodden currency, the lira, surged on Wednesday morning hours after the country’s government hit back at what it believes are “deliberate attacks” against its economy by the US, by levying significant tariffs against American goods.
Around 8.00 a.m. BST (3.00 a.m. ET), the lira made a rapid and large upwards movement against the dollar, briefly moving back below six to the dollar, and reversing some of the big downwards moves seen over the last week.
By 8.30 a.m. BST (3.30 a.m. ET) the lira was trading at roughly 6.08 to the dollar. The lira, however, remains more than 14% lower than at this time last week.
It appears that the move was triggered by the introduction of new rules by the BDDK — Turkey’s banking watchdog — which, according to a Reuters report, has cut “the limit for Turkish banks’ forex swap, spot and forward transactions with foreign banks to 25 percent of a bank’s equity.” This move is designed to make it more difficult for Turkish institutions to buy and sell derivatives in foreign markets, and to prevent investors betting against Turkish assets.
The appreciation of the lira also comes just hours after the Turkish government hit numerous American goods being imported to the country with punitive tariffs.
Tariffs have been doubled on goods including cars, tobacco, and alcohol, while coal, rice, and cosmetic products have also been hit by increases.
American automobiles will now be subject to a tariff of 120%, while alcohol will have a 140% tariff rate. The levy on leaf tobacco is at 60%.
“The import duties were increased on some products, under the principle of reciprocity, in response to the U.S.administration’s deliberate attacks on our economy,” Fuat Oktay, Turkey’s vice president said, according to numerous translations of a tweet he sent in Turkish.
Earlier in the week, President Recep Tayyip Erdogan asked Turkish citizens to boycott the use of American technology like iPhones, in response to US tariffs levied late last week.
The lira’s initial slide came amid rising tensions between the US and President Recep Tayyip Erdogan over trade. US President Donald Trump authorized increased tariffs against Turkey on Friday, in response to Turkey’s unwillingness to release an American evangelical pastor, Andrew Brunson, who has been
Erdogan exacerbated problems with the currency on Friday when he urged citizens to sell dollars and gold in exchange for lira. He doubled down over the weekend, saying there was a “currency plot” against Turkey and arguing that the fall in the lira was not connected to economic fundamentals.