Dollar slips as China-U.S. trade worries ebb

Cornelia Mascio
Agosto 18, 2018

USA stocks and emerging market currencies rebounded on Thursday after China said it will hold trade talks with the United States this month and Turkey's lira continued its recovery.

Finance Minister Berat Albayrak, Erdogan's son-in-law, told investors on Thursday that Turkey would emerge stronger from the currency crisis, insisting its banks were healthy and signaling it could ride out the dispute with Washington.

In a statement, the ministry also said it would provide flexibility on maturities and pricing to endure cash flow for companies, while taking additional measures to avoid obstacles against borrowing for companies.

An Istanbul court on Wednesday allowed the release of Amnesty International's Turkey chair Taner Kilic, who spent more than a year in jail over alleged links to a 2016 coup bid. And as the currency drops, that debt becomes so much more expensive to repay, leading to potential bankruptcies.

The common currency came under pressure in recent days as investors fretted about euro zone bank exposure to Turkey.

Relations between Ankara and Washington have soured in recent weeks following Washington's imposition of sanctions on Turkish officials over the detention of American pastor Andrew Brunson, who is under house arrest in Turkey on terrorism charges. Turkey retaliated with some $533 million of tariffs on some USA imports - including cars, tobacco and alcoholic drinks - and said it would boycott United States electronic goods.

The conflict between North Atlantic Treaty Organisation allies is even more personalized because of U.S. President Donald Trump and Turkish President Recep Tayyip Erdogan, whose uncompromising statements contribute to a sense that the tension will ratchet up before any possibility of a climbdown. Erdogan has tightened his grip since consolidating power after general elections this year.

FILE PHOTO: A US dollar banknote is seen on top of 50 and 100 Turkish lira banknotes in this picture illustration in Istanbul, Turkey August 14, 2018.

Turkey's currency remains steady against the dollar despite an apparent threat of possible new sanctions by U.S. President Donald Trump. She wouldn't be drawn on whether the Trump administration would respond.

On Thursday, Trump said Turkey had "taken advantage of the United States for many years" and referred to Brunson as a "great patriot" who was being held "hostage".

US Treasury Secretary Steven Mnuchin threatened further sanctions against Turkey if it fails to release detained American pastor Andrew Brunson.

The Turkish currency began to recover after authorities this week took steps to help bank liquidity.

The previous day two Greek soldiers held by Turkey since March for illegally crossing the border were also freed in a move warmly welcomed by Athens.

The world's two largest economies are due to impose tariffs on billions of dollars of each other's goods on August 23, in addition to levies that took effect on July 6. This week, Qatar pledged $15 billion in support to Turkey.

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