As many experts have noted throughout the past months, the Turkish lira has undergone some severe changes for the worst in the past couple of months. On Monday, the dollar rose up to 5.4 against the lira, only to later decrease to 5.29 the next day. This has been the last event in a series of concerning shifts for the currency, as it has dropped over 20% this year alone. However, recent developments are also hitting the country’s ten-year bond, which fell to a record low on Tuesday.
The more radical changes have occurred days after President Trump threatened the nation with sanctions if they didn’t free Andrew Brunson, an evangelical pastor currently detained in Turkey. He stated on Twitter:
The United States will impose large sanctions on Turkey for their long time detainment of Pastor Andrew Brunson, a great Christian, family man and wonderful human being. He is suffering greatly. This innocent man of faith should be released immediately!
The tariffs didn’t only come to their products, but mainly to the justice and interior ministers, as the U.S. prohibited its citizens from working with them. Turkey, in a rather unconventional approach, decided to come forward to the U.S. and send a delegation in order to discuss and negotiate about the tariffs. This is starkly different from their usual dismissal of foreign foes, not reaching out to them about the possible international conflict.
CNBC reached out to Marcus Chenevix, an economic analyst, for more insight on Turkey’s changing currency. He stated:
There’s an underlying trend and a short-term trigger here. The short-term trigger is the threat of sanctions. The underlying trend is the Turkish economy is in an overheating crisis. Given the high, volatile inflation of the overheating crisis, Turkish monetary-policy makers are always playing catch-up. The Turkish economy is headed for a hard landing. They’re going to face a steep correction and a big drop in growth.”