Turkey's beaten-down currency USDTRY, +0.04% gained on the U.S. dollar early Tuesday, rebounding somewhat from Monday's all-time low against the buck. One dollar recently bought 6.4535 lira, down from 6.8846 late Monday in New York. The greenback is still up sharply against Turkey's currency in August, showing a 31% gain, and it's up 70% on the lira in the year to date.<doc-sep>Turkey’s lira grabbed the attention of currency traders Friday, skidding more than 16% against the U.S. dollar to a new historic low as fears grow that the country’s financial problems could infect Europe. Meanwhile, the U.S. dollar strengthened to its firmest level in more than a year against major rivals. Don’t miss:3 reasons why the selloff in Turkey’s lira matters to global markets The Turkish lira USDTRY, -0.02% slumped 16.8% versus the U.S. dollar, with the buck fetching 6.4873, compared with 5.5426 late Thursday in New York. The lira has consistently hovered around historic lows throughout the summer but has fallen more than 28% this week alone, according to FactSet. The lira’s second-most important cross against the euro EURTRY, -0.03% saw similar price action, and one euro bought 7.3912 lira, up 15.5%, according to FactSet. The steep decline in the Turkish currency came after the European Central Bank expressed concerns about potential contagion from Turkey's problems, especially in the banking sector, according to a report from the Financial Times (paywall). The country—where President Recep Tayyip Erdogan was re-elected in a snap vote in June and whose growing power has raised questions about the independence of the country’s central bank—is struggling with double-digit inflation and its reliance on foreign funding. With much of its debt denominated in U.S. dollars, the stronger buck has added weight to its debt burden. Turkish Treasury and Finance Minister Berat Albayrak later on in a speech said that monetary policy should be independent and that Turkey’s central bank’s independence was of utmost importance. In the near term, Albaryak said Turkey needed to focus on rebalancing, including tight fiscal policy and a narrowing current-account deficit. Analysts and investors have also attributed the relentless pressure on the Turkish currency to a growing diplomatic spat between Washington and Ankara over the detention of a U.S. pastor in Turkey. Read: Here’s why there may be more pain in store for Turkey’s lira “For some days, global markets have noted the Turkish lira’s plunge with more curiosity than concern, seemingly viewing it as Turkey’s problem and no one else’s,” said Sean Callow, currency strategist at Westpac. “That seems to have changed.” Turkey’s limited stash of currency reserves could prompt it to seek a bailout from the International Monetary Fund, said Paul McNamara, investment director for emerging market debt at GAM International Management. Read:Another stock market risk: GDP growth is slowing across the globe Other emerging market currencies also suffered on Friday, dragging down by the overall market sentiment. Argentina’s peso USDARS, +0.01% , for example, dived 4.2% against the buck and hit a fresh historic low. One dollar last bought 29.2380 pesos. The ICE U.S. Dollar Index DXY, +0.03% , which gauges the dollar against a half-dozen monetary units, surged amid the turmoil, and recently was up 0.9% at 96.348, its highest level since June 2017. The euro EURUSD, -0.02% , the most significant component of the dollar gauge, fell sharply against the greenback, highlighting the spillover effect of Turkey’s dilemma on European markets. One dollar bought $1.1404 compared with $1.1526 late Thursday in New York, hitting a 13-month low. The dollar held its gain as U.S. economic data backed expectations for additional moderate interest-rate tightening this year at the Federal Reserve. The consumer-price index rose 0.2% in July, as rising shelter costs offset a decline in energy prices, a reading in line with expectations. Declines continued for other big losers this week, such as the New Zealand dollar USDNZD, -0.08% which fell to its weakest level since March 2016 on Thursday on the back of its dovish-sounding central bank, and the Russian ruble USDRUB, +0.09% , which dropped on sanction worries. Also check out:Russian ruble drops to 2-year low as further sanctions spell trouble<doc-sep>The U.S. dollar bounced to a fresh 14-month high on Tuesday after spending much of the session slightly lower. Still, emerging-market currencies, led by the Turkish lira, which had plunged in recent days, retraced some losses. The greenback, which trended higher against most of its rivals, added a modest 0.3%, measured by the ICE U.S. Dollar Index DXY, +0.04% , which last stood at 96.718. This was a level not seen since June last year. Even during the time the buck spent in negative territory of late, it held above the key level of 96, indicating that the dollar remains broadly supported as investors eye the next Federal Reserve interest-rate hike expected for September — only six weeks away. A broader-based dollar index, the WSJ Dollar Index BUXX, -0.00% , which measures the buck’s strength against 16 rivals including the lira, was little changed but also in positive territory at 90.42. Among the day’s economic news, U.S. import prices for July showed a rise of 0.1%, while household debt moderated to 3.5% in the second quarter from 3.8% before. Elsewhere, the Turkish lira rebounded against the U.S. dollar on Tuesday following an intense few sessions of unraveling that has sparked concerns of economic contagion from Turkey. Most recently, the Turkish lira USDTRY, -0.07% was up sharply against the dollar and the euro EURTRY, -0.07% . One dollar bought 6.3390 lira, down from 6.8846 late Monday in New York, dropping more than 8%. Meanwhile, a euro bought 7.1904 lira, versus 7.9079 lira in the previous session. The Turkish selloff came on the back of a mix of economic and political factors, including high inflation and a large foreign debt burden, but also its strained relations with the U.S. over the detention of evangelical pastor Andrew Brunson. Turkish President Recep Tayyip Erdogan blamed “economic terrorists on social media” for disseminating alleged disinformation about the state of Turkey’s economic condition, during Monday speeches. Don’t miss:How the lira selloff compares to Turkey’s previous crises Also Monday, the Central Bank of the Republic of Turkey introduced measures to boost liquidity in the market. But investors appeared to brush off those efforts, remaining concerned about that country’s economic health. Over the weekend, a defiant Erdogan said he had no intention of hiking rates in the country, something that economists and critics feel is needed to alleviate pressures from the rapidly declining currency. Check out:Strategists see 4 ways out of Turkey’s currency crisis The lira has dropped more than 40% against the dollar so far this year, including almost 25% in August alone, according to FactSet data. Other emerging-market currencies, which had fallen in sympathy with the Turkish lira as investors feared a spillover, also have moderated losses and turned higher. See:Why Turkey’s crisis doesn’t spell doom for all emerging-market currencies The South African rand USDZAR, -0.12% and Mexican peso USDMXN, -0.09% were both strengthening on the day, with one dollar fetching 14.2515 rand versus 14.4201 late Monday, and 18.9177 Mexican pesos versus 19.1161 pesos a day earlier. Although some expressed concerns that Turkey’s problems could portend difficulties across emerging-market currencies, which tend to maintain high dollar-denominated debts, others suggest that Ankara’s woes, including inflation and an autocratic leader, are more country specific. “We don’t doubt that some, or even many of these problems can be found in other countries but, for the most part, we think the problems are pretty specific to Turkey. Perhaps the only one that might require monitoring is the external borrowing issue as US rates rise and the dollar strengthens,” wrote Steven Barrow, currency and fixed-income strategist at Standard Bank, in a Tuesday research note. Countries that maintain a significant amount of debts denominated in dollars and that use local currencies to service those obligations can run into troubles when the greenback’s value escalates rapidly. Emerging markets have been a focus of concern for investors this year given that the dollar index has advanced by 5% in the first eight months of 2018 after declining by 10% last year. Moreover, the Federal Reserve is expected to increase rates twice more before the end of the year, perhaps providing a further boost to greenback at a time when few other countries are tightening monetary policy as aggressively.<doc-sep>The Turkish lira added to its steep losses on Friday, hitting a record low after President Donald Trump announced he was doubling metals tariffs on Turkey. The lira briefly fell 20 percent against the U.S. currency, reaching a record low, after Trump made the comment in a tweet. The currency last traded down 13.5 percent against the U.S. dollar. tweet The White House later said in a statement: "As he stated, the President has authorized the preparation of documents to raise tariffs on imports of steel and aluminum from Turkey. Section 232 tariffs are imposed on imports from particular countries whose exports threaten to impair national security as defined in Section 232, independent of negotiations on trade or any other matter." So far there has been no confirmation to CNBC of the new tariff policy from the U.S. Department of Commerce. Trump's tweet and the White House comment came after Turkish President Recep Tayyip Erdogan asked citizens to convert their dollars and other foreign currencies as well as gold holdings to lira. "Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks. This is a domestic and national struggle," Erdogan said, according to an Associated Press translation. Erdogan said Turkey was facing an "economic war" and noted the country would respond to those countries who had started it. "We are facing economic attacks today, and we need to defend our country," Erdogan said, according to a separate translation. "The economic attack against us now is the same as the coup attempt against us. I'm urging our country to increase outputs, to increase exports." Turkish stocks also fell Friday as the iShares MSCI Turkey ETF dropped 13.3 percent. The ETF was already down 42.3 percent this year before Friday's losses. The sharp drop in Turkish assets came after a delegation returned from Washington with no apparent progress on the detention of U.S. pastor Andrew Brunson, who is charged with supporting a group blamed for an attempted coup in 2016. Last month, Trump threatened to slap "large sanctions" on the country if it refuses to free Brunson. The U.S. then announced on Aug. 1 sanctions on Turkey's Justice and Interior ministers, prohibiting U.S. citizens from doing business with them. The currency pared losses slightly on a report that Jay Sekulow, one of Trump's attorneys, said the parties involved were close to reaching a resolution on the matter. — CNBC's David Reid, Gina Francolla and Reuters contributed to this report.<doc-sep>
The Turkish lira remained under heavy pressure as the country’s currency crisis continued, providing a lift to the dollar and currencies viewed as havens. The lira USDTRY, -0.04% plunged to another all-time low against the U.S. dollar on Monday, breaching 7 lira per dollar for the first time on record, after surpassing both the 5- and 6-lira benchmarks last week. One dollar last bought 7.088 lira, up from 6.4275 lira late Friday in New York. On Friday last week, the currency dropped 16% against the buck, according to Dow Jones Data Group, as Turkey’s problems culminated in a currency crisis. Check out:Strategists see 4 ways out of Turkey’s currency crisis While the Turkish currency had been hovering around historic lows all summer, it fell of a figurative cliff on Friday after a news report said the European Central Bank was concerned about contagion from Turkey, and President Donald Trump tweeted about further tariffs on Turkish imports on the back of the lira’s devaluation. Turkish-U.S. relations have also been strained by a diplomatic spat over Turkey’s detention of a U.S. pastor. Weaker currencies make a country’s products more attractive on the global market, but a currency rout can create big problems. Like many emerging economies, Turkey relies on foreign funding, so a plunge in the lira makes it more expensive to repay loans in other currencies. On top of that, Ankara is struggling with double-digit inflation, as well as a government that has spoken out against higher interest rates. Many strategists believe that consistent rate increases are one of the few things that can stave off further weakness in the currency. On Monday, the Central Bank of the Republic of Turkey pledged it would provide “all the liquidity the banks need.” The impact of the lira selloff could be felt across global stock markets, as investors assess banks’ exposure to Turkish assets. Perceived haven currencies, like Swiss franc USDCHF, -0.07% and Japanese USDJPY, -0.00% strengthened on Monday. The U.S. dollar, which first hit a 14-month high on Friday, earlier climbed to a fresh high on Monday before reversing direction for much of the U.S. trading day, which market participants attributed to profit-taking. The ICE U.S. Dollar Index DXY, +0.05% last edged back up 0.1% to 96.418, after gaining 1.3% last week. It notably remained above the key level of 96 all day. Investors also turned their attention to the EURUSD, -0.03% , which last bought $1.1387 compared with $1.1412 late Friday. “The euro has broken through $1.15, which was a key level,” said Brad Bechtel, managing director in FX at Jefferies, adding that $1.1370 was the next technical level to watch for the eurozone currency. If it fell below, the bottom would be wide open. “In this market you really want to own the dollar, yen and Swiss,” he added. “If the safe haven bid continues, the euro will remain under pressure.” Across emerging markets, the South African rand USDZAR, -0.11% and Mexican peso USDMXN, -0.09% —both of which are popular EM investment destinations—but also the Argentine peso USDARS, +0.01% and Indian rupee USDINR, -0.00% were under the most pressure. One dollar fetched 14.5612 rand versus 14.0760 late Friday, its lowest since November, and 19.2086 Mexican pesos, up from 18.9109 pesos, it’s lowest in a month. The greenback was up 29.9460 against Argentina’s peso, up 2.5% at a fresh historic high, and up at 70.0900 rupees, up 1.4% versus Friday, also marking a fresh historic low for the rupee, according to FactSet data.