A currency exchange in Istanbul in May. Photo: Burak Kara/Getty Images
The Turkish lira fell to a nearly 5-month low Monday, again pushing toward the psychologically important level of 6 per dollar, as President Trump pushed forward with sanctions against Turkey, increased previously imposed steel tariffs and threatened further penalties.
The state of play: The lira has been the world's weakest major currency so far this month, Reuters reported, having fallen 5% in just 2 weeks. That dip comes at the same time a gauge of broader emerging market currencies has risen more than 1% against the greenback.
- However, it bounced Tuesday as Trump's imposed sanctions were seen as less harmful than expected.
What's happening: In addition to Trump's threat that “big sanctions on Turkey are coming," EU governments also agreed on Monday to limit arms exports to Turkey, though they stopped short of a formal embargo.
- “I’m struggling to see a positive trigger event (on Turkey) at the moment,” Allianz emerging markets CIO Richard House told Reuters. “It is just quite staggering what is going on.”
Déjà vu: In August 2018, the lira fell by as much as 20% in 1 day after Trump threatened to double recently implemented tariffs on metals imports, pushing the currency to its lowest level ever.
- Turkish President Recep Tayyip Erdoğan exacerbated the currency crisis by pushing for sustained low-interest rates in an attempt to stimulate growth and then effectively firing the central bank governor for not cutting rates quickly enough.
Flashback: Turkish currency crisis stokes fear in world markets