The Turkish lira slid 0.8% on Monday in the face of US and European threats of sanctions and embargoes, though sceptical traders said it would weaken much further if Western allies turned words into action over Turkey’s incursion in Syria, reports Reuters.
Underlining doubts over the threats, Turkish President Tayyip Erdogan was quoted as dismissing them as “quips” on Sunday, while the country’s ambassador to the US in Geneva called a possible European Union arms embargo “a joke.”
In turn on Sunday, US President Donald Trump said on Twitter that “big sanctions on Turkey are coming.”
The lira slipped to 5.9315 against the US dollar, its weakest since May 30.
Turkish stocks and bonds also tumbled, with the main share index at its lowest level since June. The cost of insuring government bonds against default hit a six-week high.
The currency, which suffered a crisis last year that knocked Turkey’s economy into recession, has fallen more than 12% so far this year and 5% this month alone as Ankara and Syrian allies attacked Kurdish-led forces in northeastern Syria.
The intervention, now in its sixth day, has drawn international condemnation, including threats from Trump to “obliterate” Turkey’s economy with “powerful” sanctions.
But many traders and investors said in effect they would believe it when they saw it, especially after US threats earlier this year to sanction Turkey over buying Russian S-400 missile defences did not materialise.
“After being led up the hill and down on the S-400 issue, markets don’t really believe that Trump has the stomach to sanction Turkey in any meaningful way,” said Tim Ash of BlueBay Asset Management.