Turkish lira nears 8 per dollar as Erdoğan’s regional goals enflame tensions

Turkey’s lira extended a record low on Thursday, sliding towards 8 per dollar, as President Recep Tayyip Erdoğan’s efforts to exert Turkish power across the region enflamed political tensions with key global powers and allies.

The United Nations Security Council was due to meet on Friday to discuss a Turkish Cypriot decision this week to re-open an abandoned beach on the ethnically divided Mediterranean island. The beach, located in the disputed ghost town of Varosha, was due to re-open on Thursday after being closed off since a Turkish military invasion in 1974.

The lira fell to as low as 7.9391 per dollar, extending losses this year to 25 percent. It traded down 0.7 percent at 7.935 against the U.S. currency at midday local time in Istanbul.

The emerging political spat over Varosha – Russia and Greece are among countries who have slammed this week’s move - is the latest in a series of international disputes involving Turkey.

Earlier this week, videos posted on social media showed Russian S-400 air defence missiles speeding though Turkish streets. Bloomberg reported that the system would be tested comprehensively next week despite strong objections from the United States and other NATO allies.

Two U.S. senators wrote a letter to Secretary of State Mike Pompeo on Wednesday calling on the Trump administration to impose sanctions on Turkey for reportedly testing the missile system’s radars on Greek F-16 fighter jets in late August. Trump has so far avoided calls by Congress to punish Turkey for taking delivery of the system last year, which contravened a U.S. ban on buying weapons from Russian firms.

Turkey, a member of NATO, is also embroiled in a conflict between Azerbaijan and Armenia over the disputed region of Nagorno-Karabakh. Russia, the United States and France are leading talks in Geneva on Thursday aimed at ending the fighting over the majority Armenian enclave, located within Azerbaijan’s borders.

Turkey has offered its full support for Azerbaijan in the conflict, supplying fighters from Syria and calling for a full withdrawal of Armenian forces before peace talks can begin. Hostilities broke out late last month.

Greece and Turkey are also holding NATO-sponsored negotiations to resolve a dispute over territory in the eastern Mediterranean after Ankara sent seismic survey ships, escorted by the Turkish navy, into waters claimed by Greece and Cyprus to explore for hydrocarbons. The European Union and the United States have termed the Turkish activities as illegal under international law.

The Turkish lira has also slumped this year after the government ordered state-run banks to flood the market with cheap loans to help stimulate an economic revival. The central bank has kept interest rates at below the rate of inflation despite the lira’s declines, spending tens of billions of dollars of its foreign exchange reserves in the currency’s defence.