Decline in Turkish Currency and Stock Market After US Sanctions

One day after the imposition of US sanctions on two Turkish ministers, the value of the currency and the stock market in Turkey faced turbulence. According to Hurriyet newspaper, each US dollar was traded at 4.98 Turkish lira at the beginning of Thursday, August 2, and by midday, its value increased to 5 lira and 5 kuruş. (Every hundred kuruş is equal to one lira). Thus, the value of the Turkish currency decreased by 1.4 percent during the day. The lira had also experienced declines in previous months. The Turkish lira has lost 25 percent of its value against the dollar since the beginning of this year. The value of shares in the Turkish stock market also faced a 1.7 percent decline at the beginning of the day, and this decrease continued throughout the day. At the time of this report, the value of the Turkish stock market had fallen by more than 3 percent compared to the previous day. The day before, the United States imposed sanctions on the Turkish ministers of interior and justice in response to the continued detention of Andrew Brunson, an American pastor imprisoned in Turkey. Washington claims these two ministers were involved in the arrest and detention of Mr. Brunson. Meanwhile, Turkish President Recep Tayyip Erdoğan called the sanctions against his cabinet ministers unacceptable. The Turkish Foreign Minister also threatened that this action would not go unanswered. According to the official Turkish news agency Anadolu, Berat Albayrak, Turkey's Minister of Economy, stated that the impact of the US sanctions would be 'limited and temporary.' Bloomberg reported that Turkey is facing challenges due to the need to attract foreign investments to repair the country's economy on one hand and to repay them with a more expensive dollar on the other. The agency also pointed out Turkey's inflation rate of over 16.3 percent last month, stating that the decline in the lira's value would exacerbate inflation in the country. The Central Bank of Turkey, which had previously predicted an inflation rate of 8.4 percent for this year, announced on Tuesday that the inflation rate would reach 13.4 percent by the end of the year. The inflation rate for July is the highest in the last 14 years.