What happened to the Turkish lira?
The Turkish lira lost a fifth of its value against the U.S. dollar last week, hitting a new low on Monday before some recovery later in the week. The currency has lost over 40% of its value against the dollar this year.
What caused this?
The U.S. Treasury had recently sanctioned two Turkish Ministers in response to Turkey’s continuing detention of American pastor Andrew Brunson on spying and terror charges. Mr. Brunson was detained in 2016 as part of President Recep Tayyip Erdogan’s crackdown following an unsuccessful coup against him. U.S. President Donald Trump also said last week that he would double import tariffs on Turkish steel and aluminium.
What are the wider financial ramifications?
On Tuesday, the Indian rupee breached the 70 mark against the dollar for the first time, largely caused by the lira’s fall. Analysts have been concerned that the turmoil could hit other (emerging) markets. European banks that own significant stakes in Turkish lenders are also at risk.