First Published: 2017-11-21

Turkish lira at new low against US dollar
Lira down over one percent at 3.97 against dollar following delay of trial of Turkish-Iranian gold trader accused of defying US sanctions on Iran.
Middle East Online

There are concerns over the impact of the case on US-Turkey

ANKARA - The Turkish lira hit record lows in value against the US dollar on Tuesday as investors took fright over an impending trial in the United States and changes to banking regulations.

The lira was down over one percent to 3.97 to the dollar at 0652 GMT before rallying slightly to 3.96 at 0800 GMT.

The drop followed the delay on Monday of a scheduled trial of Turkish-Iranian gold trader Reza Zarrab and Mehmet Hakan Atilla, the deputy chief executive of Turkish lender Halkbank, accused of defying US sanctions on Iran.

The trial has caused anger in Ankara, with the Turkish government on Monday calling the case "political" and a plot against Turkey. The government spokesman and Deputy Prime Minister Bekir Bozdag claimed the suspects were being held like hostages.

Judge Richard Berman announced that jury selection, which had been set to begin Monday, was delayed until November 27. Opening statements are now scheduled for December 4.

There are concerns over the impact of the case on US-Turkey relations and the possibility of fines against Halkbank in the event of a guilty verdict.

The NATO allies' ties have already been strained over Washington's support for a Syrian Kurdish militia that Turkey views as a "terror" group as well as the failure to extradite a Pennsylvania-based Muslim cleric blamed for last year's failed coup.

Turkish authorities also announced new regulations in the "merger, division, transfer of assets and exchange of bank shares" in the Official Gazette on November 16, state-run news agency Anadolu reported.

But Deputy Prime Minister Mehmet Simsek on Monday denied claims that Halkbank would be absorbed into another bank: "There is no such thing," he said, quoted by Anadolu.

As the lira weakened, the Turkish central bank announced that banks would not be able to borrow funds overnight in the interbank money market from Wednesday.

President Recep Tayyip Erdogan lashed out at the central bank last week over its refusal to cut interest rates which he said was causing high inflation.

Erdogan has repeatedly verbally attacked the bank over its unwillingness to cut rates.

The central bank's last change in rates was in January while inflation was at 11.9 percent last month, the highest in 2017 so far.

Conventional economic wisdom suggests inflation should, however, go down as interest rates are raised as this softens demand and weakens money supply growth in an economy.

 

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