Last Update: 13:57
President Tayyip Erdogan said on Tuesday Turkey will boycott electronic products from the United States, retaliating in a dispute with Washington that has helped drive the lira to record lows, according to Reuters. 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 ErdoganÎ„s calls for lower interest rates and worsening ties with the United States.
The weakness of the Turkish currency has rippled through global markets. Its drop of as much as 18 percent on Friday hit U.S. and European stocks as investors fretted about banksÎ„ exposure to Turkey.
On Tuesday the lira recovered some ground, trading at 6.53 to the dollar at 0918 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 ErdoganÎ„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, says Reuters.
"We will impose a boycott on 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.
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.
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 thereÎ„s danger, then we will have given into the enemy," he said.
According to Reuters, although the lira enjoyed 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 thereÎ„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, AnkaraÎ„s plan to buy Russian defence systems and the detention of an American pastor, Andrew Brunson.
The White House on Monday said U.S. national security adviser John Bolton met TurkeyÎ„s ambassador to the United States to discuss the detention of Brunson. The pastorÎ„s Turkish lawyer launched a fresh appeal on Tuesday for his release.
TurkeyÎ„s business lobbies called on Tuesday for a tighter monetary policy to stabilise the lira, and for diplomacy to solve U.S.-Turkish disputes.
Following MondayÎ„s meeting between Bolton and Turkish ambassador Serdar Kilic, U.S. officials have given no indication that the United States has been prepared to give ground in the standoff between the two countriesÎ„ leaders.