Turkish lira falls after Trump terminates preferential trade deal
Turkey’s lira fell against the dollar after U.S. President Donald Trump terminated a preferential trade agreement for the country.
But losses were limited after Trump also reduced import tariffs on Turkish steel, imposed during a political dispute in August last year, to 25 percent from a previous 50 percent.
The lira fell 0.4 percent to 6.06 per dollar at 11:32 a.m. in Istanbul. It was trading well off a seven-month low of 6.245 against the U.S. currency set on May 9.
Political tensions between the United States and Turkey have helped cause turmoil in the currency market and the economy, which has entered a recession and a period of high inflation. The two NATO allies are currently embroiled in a spat over Ankara’s plans to buy S-400 air defence missiles from Russia.
"I have determined that, based on its level of economic development, it is appropriate to terminate Turkey's designation as a beneficiary developing country effective May 17, 2019," Trump said in a statement late on Thursday.
The U.S. dollar as also been gaining against major currencies this week amid a risk-off atmosphere caused by a trade dispute between the United States and China.
Turkey had called on the United States to refrain from ending its trade arrangement, pointing to an agreement between Trump and President Recep Tayyip Erdoğan to increase bilateral sales of goods and services.
Ankara is due to start taking delivery of the S-400 military equipment in July.
Traders say the lira has technical support against further falls at around 6.13 per dollar, where buying occurred on Monday.
The lira is also under pressure as Turks, whose living standards have been reduced by recent economic turmoil and inflation of almost 20 percent, sell it for foreign currency.
Foreign currency deposits in Turkey’s banking system increased by $2 billion to $181.2 billion in the week to May 10 as so-called “dollarisation” continued, central bank data published on Thursday showed.