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Turkish Erdogan calls Lira decline ‘economic warfare'

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Speaking for the first time during the worst week in the history of the Turkish Lira which repeatedly saw all-time lows in exchange markets, President Recep Tayyip Erdogan appeared to put the blame on foreign powers, calling it "economic warfare" and saying, “If they have the dollar, we have our people and our Allah.” – reported Kurdistan 24.

“The dollar does not bind us,” he told a rally of his supporters on Friday in the Black Sea province of Bayburt while boasting of a million-dollar highway project.

“I call on everybody who keeps dollars, Euros, and gold under the pillow to exchange with our national currency. This is a national struggle against those who wage war on us. This will be the best answer to the West,” he said, in a bid to reverse the sharp decline just hours after the Lira fell further to 6.46 against the dollar, the lowest rate ever.

However, in a bid to reverse the sharp decline, just hours later, the Lira fell further to 6.46 against the dollar, the lowest ever.

He also rallied against what he called “the interest rate lobby,” revisiting past fierce critique of high interest rates. Turkey's central bank last month refused to raise interest rates as it readjusted its inflation forecast for the end of the year to 13.5 percent, five points higher than what was previously expected.

The Lira has been losing value in recent years due to a lack of liquidity, concerns regarding an erosion of the rule of the law, less foreign investment, Turkey’s involvement in wars in Syria and Iraq, as well as Erdogan’s tightening grip on power.

But Turkey’s deepening diplomatic crisis with the US over the continued detention of American pastor Andrew Brunson and Washington’s imposition of sanctions on two Turkish ministers proved to be the straw that broke the camel’s back, leading to an unprecedented depreciation of the Lira in the face of a continued downward spiral in the nation's financial meltdown.

Erdogan's son-in-law and the Minister for Finance and Treasury Berat Albayrak held a much-awaited press conference shortly after Erdogan spoke.

Albayrak, who is seen as the president's main instrument of control over the nominally independent Central Bank, launched what he termed “the New Economic Approach,” promising in a confident voice to compete in world markets, principles, and sustainability, as well as promoting a tighter fiscal policy and reform, though without much elaboration his plans for bringing such lofty aspirations to fruition.

At the time of writing this report, he had so far refrained from commenting directly on Lthe ira’s decline under his watch.

When Erdogan began his speech, US dollar - Turkish Lira parity was hovering above 5.90, but as it drew to a close, the currency saw another crash to 6.95.

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The lira dropped to an all-time low as geopolitical tensions between NATO allies Turkey and the United States continued to escalate, reported Axios (US).

The big picture: President Trump announced via tweet that the U.S. would be raising tariffs on Turkey to 50% on steel and 20% on aluminum. Per CNBC, the tweet and the subsequent currency sell-off came after a Turkish delegation returned from the U.S. having made no progress in talks about pastor Andrew Brunson, whose detention prompted the White House to slap sanctions on high-ranking Turkish officials last week.

President Recep Tayyip Erdoğan urged Turkish citizens to exchange American dollars and gold into lira in a speech Friday, declaring a need to fight back against those who have "waged an economic war" against his people, per Reuters.

Erdoğan also said he held a phone call with Russian president Vladimir Putin, whose country has also been hit by U.S. sanctions, to "discuss economic ties," reports the AP.

The Turkish economy was already in a fragile state prior to the escalation of tensions, largely because of the pressure Erdoğan has exerted on the central bank to lower interest rates.

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