Turkey’s plunging currency is stoking anxieties on Wall Street and throughout global markets.
On Sunday — early Monday in Asia — the Turkish lira put in fresh lows against the U.S. dollar, down more than 8% in Asian trading hours, after what had been a plodding descent in the first eight months of 2018 culminated in a death spiral Friday, wiping out some 14% of the currency’s value against greenback.
Most recently, one dollar changed hands at 6.9890 lira USDTRY, +9.0159% , compared with 6.4275 lira late Friday in New York, a drop of 8.7%, according to FactSet data. At its lows late Sunday, Eastern time, one dollar bought about 7.1310, an 11% tumble intraday.
The currency crisis in Ankara took a turn for the worse Friday after President Donald Trump, via Twitter, said that he authorized the doubling of steel and aluminum tariffs against the country. Turkey already is under U.S. sanctions for its detention of U.S. evangelical pastor Andrew Brunson, who is being held on espionage charges.
During a rally over the weekend, Turkey’s outspoken leader President Recep Tayyip Erdogan struck a defiant tone against the U.S. and Trump’s recent tariff threats against what the Turkish leader described as an important ally in the North Atlantic Treaty Organization.
I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!
— Donald J. Trump (@realDonaldTrump)
“You cannot tame our people with threats,” Erdogan said Saturday, during a series of speeches that he emphatically delivered in front of supporters at coastal cities near the Black Sea. “I call out to those in the United States. It is a shame. You are trading a strategic NATO ally for a pastor,” he said at one rally.
The dilemma with Turkey is fraught and is certain to continue to carry with it added anxieties for markets, not simply because of the crushing decline in Ankara’s currency, which could result in knock-on effects throughout other global markets, but because Turkey holds a strategic position on the world stage.
For one, Turkey, a large mostly Muslim nation of some 80 million people, has been a strategic alley to the U.S. in its fight against Islamic State terrorism in Syria, with which Turkey shares a border. Already that U.S.-Turkey relationship has shown signs of fraying.
In addition, Turkey has stepped up its relationship with Russia at a time when U.S.-Russian relations aren’t on a strong footing. Last year, Turkey agreed to purchase long-range missiles from Moscow.
Turkey has threatened to seek new allies as it attempts to emerge from the “interest rate, inflation spiral they are trying to force it into,” Erdogan has told supporters. Beyond Russia, Turkey has strengthened its ties with Iran, another nation with which the U.S. is at odds.
Wall Street will watch to see if Turkey can manage to maneuver from out of its current crisis that some fear could have spillover implications for the world’s banks.
On Friday, the Dow Jones Industrial Average DJIA, -0.77% S&P 500 index SPX, -0.71% and the Nasdaq Composite Index COMP, -0.67% all got knocked solidly lower, and the currency anxieties delivered even deeper blows to European benchmarks, where the pan-European Stoxx Europe 600 SXXP, -1.07% finished the session off 1.1% and Germany’s DAX DAX, -1.99% logged its worst one-day decline, off 2%, since June 25, according to Dow Jones Market Data.
U.S. stocks looked poised to fall again Monday, with stock-index futures for the Dow YMU8, -0.53% , S&P 500 ESU8, -0.43% and the Nasdaq-100 NQU8, -0.43% looking set to post opening declines. In Asia, China’s main Shanghai Composite Index SHCOMP, -1.47% traded 0.9% lower.
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