ISTANBUL/LONDON (Aug 16): The Turkish lira strengthened more than 3% on Thursday before a presentation by Finance Minister Berat Albayrak to investors, shrugging off U.S. comments ruling out the removal of steel tariffs on Turkey even if it frees a U.S. pastor.
The currency gained some support from the announcement late on Wednesday of a Qatari pledge to invest US$15 billion in Turkey and Albayrak will be looking to reassure investors in his conference call at 1300 GMT.
The lira, still down 34% against the dollar this year, firmed to 5.7700 by 1100 GMT from a close of 5.95. Other Turkish markets were less buoyant: the main share index dipped 1.4% and the 10-year benchmark bond yield rose to 21.37%, from 21.02%.
After hitting a record low of 7.24 this week, the lira has benefited from central bank steps to underpin a currency hit by concerns at President Tayyip Erdogan's influence over monetary policy and a bitter dispute with Washington.
JP Morgan said moves by Turkish authorities showed they were committed to stabilising the currency with technical measures such as restricting foreign exchange swaps and cancelling repo auctions to push up the average cost of bank funding.
"Yet at the same time (Turkish authorities) are reluctant to adopt orthodox policy frameworks," JP Morgan said. "We suspect that there are diminishing marginal returns to additional technical measures so long as they are not accompanied by a fundamentally-oriented policy package."
Investors said Albayrak's conference call would test whether Turkey can persuade markets that its monetary policy is not hostage to political influence.
The White House said on Wednesday that it would not remove steel tariffs on Turkey, appearing to give Ankara little incentive to work for the release of Andrew Brunson, a pastor on trial in Turkey on terrorism charges.
Washington wants the evangelical Christian freed but Turkish officials say the case is a matter for the courts.
President Donald Trump doubled tariffs on Turkish metals exports to the United States last week prompting Ankara, which says it will not bow to threats, to raise tariffs on U.S. cars, alcohol and tobacco by the same amount on Wednesday.
The pastor row is one of several between the NATO allies, including diverging interests in Syria and U.S. objections to Ankara's ambition to buy Russian defence systems, that have contributed to instability in Turkish financial markets.
"Economic coup attempt"
Erdogan has repeatedly told Turks to exchange gold and hard currency into lira, saying the country was involved in an economic war with enemies and a presidential official gave a similar message on Thursday.
"We are a fending off this economic coup attempt with the wisdom of the Turkish nation and the leadership of our president," Fahrettin Altun, the president's communications director wrote on Twitter.
Erdogan has called for a boycott of U.S. electronic goods and Turkish media have given extensive coverage to anti-U.S. protests, including videos on social media showing Turks apparently burning dollar bills and destroying iPhones.
Turkish Airlines and Turk Telekom have said they will halt advertising in U.S. media.
On Wednesday night, a group of Istanbul taxi drivers hung Turkish flags on their cars and sounded their horns, as they drove in convoy to the U.S. consulate, laying a black wreath there in protest, the Demiroren news agency said.
On Wednesday Erdogan met for more than three hours with Qatar's Emir, who approved a package of economic projects, investments and deposits worth US$15 billion.
Earlier, Erdogan doubled tariffs on imports of U.S. passenger cars to 120%, alcoholic drinks to 140% and leaf tobacco to 60%. Tariffs were also doubled on goods such as cosmetics, rice and coal.
The White House called the Turkish response as a step in the wrong direction and signalled a hard line.
"Pastor Andrew Brunson is an innocent man held in Turkey & justice demands that he be released. Turkey would do well not to test Trump’s resolve to see Americans who are wrongfully imprisoned in foreign lands returned home to the United States," Vice President Mike Pence said in a tweet.
On Wednesday, a court rejected an appeal for Brunson to be released from house arrest. An upper court had yet to rule on the appeal, his lawyer told Reuters.