President Tayyip Erdogan said on Tuesday Turkey would boycott electronic products from the United States, retaliating in a row with Washington that helped drive the lira to record lows.
The lira has lost more than 40 percent this year and crashed to an all-time low of 7.24 to the dollar early on Monday, hit by worries over Erdogan’s calls for lower interest rates and worsening ties with the United States.
The lira’s weakness has rippled through global markets. Its drop of as much as 18 percent on Friday hit European and U.S. stocks as investors fretted about banks’ exposure to Turkey.
On Tuesday the lira recovered some ground, trading at 6.5300 to the dollar at 1334 GMT, up around five percent on the day.
It was supported by news of a planned conference call in which the finance minister will seek to reassure investors concerned by Erdogan’s control of the economy and his resistance to interest rate hikes to tackle double-digit inflation.
Erdogan says Turkey is the target of an economic war, and has made repeated calls for Turks to sell their dollars and euros to shore up the national currency.
“Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together,” he told members of his AK Party in a speech.
The United States has imposed sanctions on two Turkish ministers over the trial on terrorism charges of a U.S. evangelical pastor in Turkey, and last week Washington raised tariffs on Turkish metal exports.
It was unclear whether Erdogan’s call was widely heeded, but a Turkish news agency said traders in Istanbul’s historic Eminonu district converted $100,000 into lira on Tuesday.
Chanting “Damn America”, they unfurled a banner saying “we will win the economic war”, Demiroren agency said. Amid calls to “burn” the dollars, the group headed to a bank branch where they converted the money, it said.
Erogan also said Turkey was boycotting U.S. electronic products. “If they have iPhones, there is Samsung on the other side, and we have our own Vestel here,” he said, referring to the Turkish electronics company, whose shares rose five percent.
His call met a mixed response on Istanbul streets.
“We supported him with our lives on July 15,” shopkeeper Arif Simsek said, referring to a failed 2016 military coup. “And now we will support him with our goods. We will support him until the end.”
But shopkeeper Umit Yilmaz scoffed. “I have a 16-year-old daughter. See if you can take her iPhone away … “All these people are supposed to not buy iPhones now? This can’t be.”
Erdogan said his government would offer further incentives to companies planning to invest in Turkey and said firms should not be put off by economic uncertainty.
“If we postpone our investments, if we convert our currency to foreign exchange because there’s danger, then we will have given into the enemy,” he said.
Although the lira won a small respite on Tuesday, investors say measures taken by the Central Bank on Monday to ensure liquidity fail to address the root cause of lira weakness.
“What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain — but without it there’s just no credibility of promises to restabilise things,” said Craig Botham, Emerging Markets Economist at Schroders.
Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.
Relations between NATO allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara’s plan to buy Russian defence systems and the detention of an American pastor, Andrew Brunson.
U.S. national security adviser John Bolton on Monday met Turkey’s ambassador to the United States to discuss Brunson’s detention. Following the meeting, U.S. officials have given no indication that the United States has been prepared to give ground in the standoff between the two countries’ leaders.
Ankara has repeatedly said the Brunson case was up to the courts and a Turkish judge moved Brunson from jail to house arrest in July. Infuriated by the move, which Washington said was insufficient, Trump sanctioned two Turkish ministers and doubled tariffs on metal imports, adding to lira’s slide.
The U.S. Charge d’Affaires in Turkey visited Brunson on Tuesday and repeated a call for his case – and that of other U.S. nationals and consular staff – to be resolved fairly, swiftly and transparently.
The visit came after Brunson’s Turkish lawyer launched a fresh appeal to a Turkish court for his release.