With pithy words the Turkish president distributes against France and calls on the Turks to boycott French goods. Erdogan’s belligerent tones are not well received on the stock market. The lira is falling to new lows. Since the beginning of the year it has lost 40 percent of its value compared to the euro.
The decline in the value of the Turkish currency continues unchecked after threats from Turkish President Recep Tayyip Erdogan to the address of France. The lira fell to record lows in trading with the US dollar and the euro. For the first time, more than eight lira had to be paid for one dollar. The Turkish currency has been on the decline against the dollar for nine weeks now. This is the longest period of price losses since 1999. Experts warn of the consequences of the decline in value.
At the beginning of the week, 8.08 lira had to be paid for one dollar and 9.55 lira for one euro, which was more than ever before. Recently, Turkey’s relationship with important trading partners in the European Union (EU) had come to a head after Erdogan sharply attacked his French counterpart Emmanuel Macron. Erdogan had accused Macron of Islamophobia in the dispute over the Mohammed cartoons and described the French president as an illness that had to be investigated. In addition, Erdogan had brought a boycott of French goods into play.
After the course of the Turkish currency was able to stabilize last Friday, the downward trend has now accelerated again. Since the beginning of the year, the lira has lost more than 40 percent of its value when trading the euro and 35 percent when trading the dollar.
Russian missiles: setback due to impending US sanctions
The Turkish currency suffered its most recent major setback last week when the country’s central bank failed to raise the key interest rate as widely expected. Despite a high inflation rate of almost twelve percent, the central bank had left the key interest rate unchanged at 10.25 percent, thus giving up hope of an interest rate hike cycle in the fight against inflation. In the past, Erdogan had spoken out against rate hikes several times, thereby questioning the independence of the central bank.
Ankara is also threatened with US sanctions over the Russian S-400 missile defense system, which NATO partner Turkey acquired last summer. Last week, the US Department of Defense strongly condemned a test deployment of the system in Turkey. Erdogan said on Sunday that the US should impose sanctions and warned that they did not know who they were dealing with.
The US government fears, among other things, that Russia could use the sensitive radar of the weapons system to get data on the capabilities of the US F-35 fighter jet. Ankara was a partner in the construction of the fighter jet and wanted to buy numerous aircraft. Because of the arms deal with Moscow, the United States excluded Turkey from the F-35 program.