Concerns mounted Friday after a report in the Financial Times that the supervisory wing of the European Central Bank had over the last weeks begun to look more closely at eurozone lenders' exposure to Turkey. The lira slid to a fresh record low against the USA dollar.
U.S. President Donald Trump said Friday he had authorized the doubling of steel and aluminum tariffs with respect to Turkey, as tensions mount between the two North Atlantic Treaty Organisation allies.
The new duties on Turkey are double the level that Trumpimposed in March on steel and aluminum imports from a range ofcountries.
"Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks". Those words will further alarm many investors, suggesting that Turkey will neither impose a conventional economic programme to protect its currency nor find a way to come to terms with the United States over a tangle of issues that have brought them to loggerheads - chiefly, the jailing of United States missionary Andrew Brunson on terrorism charges.
The Turkish currency has plunged to an all-time low amid concerns over the president's economies policies persisted and as a dispute with the USA showed no sign of subsiding. "They keep lagging behind the curve and the pace of the depreciation and the penalty that the market inflicts on Turkey when it sells off is increasing at a more than linear pace, nearly exponentially".
Turkey said on Friday it would retaliate to the raising of steel and aluminium tariffs by the US administration.
Emerging market stocks lost 1.66 percent, while the Mexican peso, a proxy for emerging market currencies, shed 1.29 percent to the dollar. With the Russian ruble also falling sharply on the threat of more US sanctions, the two biggest banking markets in eastern Europe are in turmoil.
On Friday, the Turkish currency plunged to another record low amid concerns over Erdogan's unorthodox economic policies and a diplomatic row with the United States that has led to sanctions.
More evidence of how nervous investors are about Turkey's economy could be seen in the iShares MSCI Turkey exchange-traded fund, which plunged 18% and saw the most premarket trades ever, according to Bloomberg.
Turkey later warned the United States that sanctions and pressure would only serve to harm ties between the two North Atlantic Treaty Organisation allies, adding Ankara would continue to retaliate as necessary against US tariffs.
The lira has fallen more than 40 percent this year, fanning worries about a full-blown economic crisis.
Erdogan said that there were "various campaigns being carried out" against the country.
The United States is the biggest destination for Turkish steel exports with 11 per cent of the Turkish export volume.
New Finance Minister Berat Albayrak - Erdogan's son-in-law - rolled out the government's new economic plan on Friday, promising central bank independence and tighter budget discipline, but giving few details to reassure investors. High level meetings in Washington between US and Turkish officials ended this week without an apparent resolution.
Jefferies analysts said Turkey contributed 14 percent to BBVA's first-half group profit and 9 percent to UniCredit's consolidated profit, although their capital exposure is limited.