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FOREIGN EXCHANGE

FX: What’s in store for the Turkish lira?

Traders have been staying away from the Turkish currency this year as they watched a steady decline in its value against the dollar, but the recent deterioration of relations between Turkey and the US sent the currency spiralling into a full-blown crisis.

By Anna Fedorova

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The escalating row over Turkey’s detention of American pastor Andrew Brunson appeared to be the last straw, sending the lira into freefall in August.

Brunson was arrested in October 2016 and accused of colluding with an organization the Turkish government claims is behind that year’s failed coup attempt.

On August 17, a Turkish appeals court rejected the application to release the pastor, causing renewed outrage from the US government, which could lead to further sanctions.

On August 10, US president Donald Trump had already begun his economic attack on Turkey by announcing in a tweet that he would be doubling aluminium and steel tariffs on the country, to 20% and 50% respectively.

During the same week, Washington also said Turkey’s duty-free access to US goods was under review, which could affect some $1.66 billion of Turkish imports.

These announcements sent the lira over the edge, but underlying economic data have been putting pressure on investor confidence for some time.