Turkey to boycott US electronic products

US DISPUTE

Although the lira enjoyed a small respite on Tuesday, investors say measures taken by the Central Bank on Monday to ensure liquidity fail to address the root cause of lira weakness.

"What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain -- but without it there's just no credibility of promises to restabilise things," said Craig Botham, Emerging Markets Economist at Schroders.

Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.

Relations between NATO allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara's plan to buy Russian defence systems and the detention of an American pastor, Andrew Brunson.

The White House on Monday said US national security adviser John Bolton met Turkey's ambassador to the United States to discuss the detention of Brunson. The pastor's Turkish lawyer launched a fresh appeal on Tuesday for his release.

Traders said news that Finance Minister Berat Albayrak will hold a conference call with up to 1,000 investors to discuss the economy might also have helped support the currency.

"I think the investor call Albayrak has scheduled has helped lira firm," said TEB Investment strategist Isik Okte. "I believe the new and important topics will be discussed in this call, otherwise there would not be such an attempt."

"The concerns are ongoing in the market but it is possible to mention a limited optimism for the first time in a while," a foreign exchange trader said.

Turkey's business lobbies called on Tuesday for a tighter monetary policy to stabilise the lira, and for diplomacy to solve US-Turkish disputes.

Following Monday's meeting between Bolton and Turkish ambassador Serdar Kilic, US officials have given no indication that the United States has been prepared to give ground in the standoff between the two countries' leaders.

Ankara has repeatedly said the Brunson case was up to the courts and a Turkish judge moved Brunson from jail to house arrest in July. Infuriated by the move, which Washington said was insufficient, Trump sanctioned two Turkish ministers and doubled tariffs on metal imports, adding to lira's slide.

White House economic adviser Kevin Hassett said Treasury Secretary Steve Mnuchin was monitoring the financial situation in Turkey "very closely".

Reuters