Why Turkey’s currency is plunging and what it means

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The lira plunged to as low as 6 against the U.S. dollar on Friday, a day after a Turkish delegation returned from talks in Washington with no apparent solutions to their simmering crisis.

Turkey's economic woes worsened after US President Donald Trump escalated a feud with Turkey by doubling tariffs on metals imports.

He urged Turkish citizens to immediately exchange their gold and dollars for lira.

"The surge in Turkish inflation, bond yields and the even more dramatic plunge in Turkey's exchange rate in 2018 suggest that the country could now be in danger of heading for a bust", Berenberg economist Carsten Hesse said.

Erdogan on Friday appealed for calm and called on people to change foreign money into local lira. Summer vacations in Europe and the USA means lower liquidity that can compound movements in currencies.

"At this point, the ball is in Mr Erdogan's court...who is unlikely to back down and will continue to dig himself and the Turkish economy into a deeper hole", Mr Erdemir argued.

With US sanctions and tariffs hitting Turkey this month for its refusal to release an American pastor, the relationship between the two North Atlantic Treaty Organisation allies is crumbling amid fears on the regional impact.

Last week, the United States imposed sanctions on Turkey's justice minister and interior minister for not releasing pastor Andrew Brunson.

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"This is a national, domestic battle".

Turkey's currency fell Friday after its economy was rattled by the United States' move to slap the country with more tariffs. Lindsey GrahamLindsey Olin GrahamGOP lawmaker: Every white suburban district in the country will be a swing district this year The Hill's Morning Report - Trump to GOP: I will carry you GOP senator: "Real likelihood" Dems win the House "by 10 or 12 more seats than they need" MORE (R-S.C.) tweeted Friday.

It was reported that Erdogan's son-in-law and Turkey's new finance minister, Berat Albayrak, were set to unveil a "new economic model" on Friday, but the announcement did little to reassure investors. Turkey's energy minister announced on August 8 that Turkey will keep buying liquid natural gas from Iran in violation of US sanctions.

Hoping to put pressure on the North Atlantic Treaty Organisation ally to free the pastor, the White House sanctioned two top Turkish government officials. He claims higher rates lead to higher inflation - the opposite of what standard economic theory says.

Turkey's ever combative President Recep Tayyip Erdogan vowed to not bow to economic pressure.

In Washington, where Turkey seems to have lost its friends and faces a passionate anti-Erdogan lobby of which the Gulenists are an important part, there may be wishful thinking that an economic collapse could sweep him from power. "Don't heed them", Erdogan said Thursday. As the currency drops, Turkish companies and households with debt in foreign currencies see the cost of repaying those loans expand.

"The price of the food that I buy increases day by day, the fuel that I put in my vehicle to distribute lunches is more expensive, but I can not raise my prices from one day to the next, " she said. 'On some days, I end the day with a loss'. -Turkish relations is a dispute over an American clergyman who has been jailed in Turkey since December 2016.

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