Erdogan under pressure as Turkish lira plunges to record low

President Erdogan has defied market calls for an interest rate increase. (AFP/ Turkish presidential press service)
Updated 15 August 2018
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Erdogan under pressure as Turkish lira plunges to record low

  • The lira dived to record lows of 7.24 to the dollar and 8.12 against the euro very early on Monday
  • The lira had tumbled about 16 percent against the dollar on Friday

NEW YORK: Turkey’s President Recep Tayyip Erdogan came under renewed pressure on Monday to reverse his economic policies as the troubled lira tumbled to record lows against the euro and dollar.

The US dollar, Japanese yen and the Swiss franc have been the preferred safe havens for scared investors.

The lira dived to record lows of 7.24 to the dollar and 8.12 against the euro very early in the day, then recovered somewhat after Turkey’s central bank announced a raft of measures aimed at calming markets, only to slip back again late in the session.

“The attempts by Turkey to halt the demise of the lira and the country’s soaring bond yields have proven inadequate thus far,” said David Cheetham, chief market analyst at XTB.

“Investors remained fearful on Monday over the Turkish lira’s precipitous plunge — and the concerns that a financial crisis in the country would ripple through the rest of Europe,” Spreadex analyst Connor Campbell said.

Sharp depreciation

“So far the impact of the lira crash has been limited in Europe and the rest of the world,” said Agathe Demarais, Turkey analyst at The Economist Intelligence Unit.

“However, within a few months Western banks that have strong ties with Turkey will feel the impact of the crisis as Turkish corporates will struggle to repay debt in foreign currency.

“The sharp depreciation of the lira has almost doubled the local currency value of external debt repayments since the start of the year.” 

The lira had tumbled about 16 percent against the dollar on Friday, after US President Donald Trump doubled tariffs on steel and aluminum from Turkey.

The crisis has been sparked by a series of issues including a faltering economy — Erdogan has defied market calls for an interest rate increase — and tensions with the United States, which has hit Turkey with sanctions over its detention of an American pastor.

‘Black Friday’

In its first statement since what was dubbed “Black Friday” in Turkey, the nation’s central bank said on Monday it was ready to take “all necessary measures” to ensure financial stability, promising to provide banks with “all the liquidity” they need.

The central bank also lowered reserve requirement ratios for banks, in a move also aimed at staving off any liquidity issues.

But the statement gave no clear promise of rate increases, which is what most economists say is needed.


Boeing to hold airline call on 737 MAX systems after Indonesia crash

Updated 20 November 2018
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Boeing to hold airline call on 737 MAX systems after Indonesia crash

  • A Lion Air Boeing 737 MAX crashed in the Java Sea on October 29, killing all 189 people on board
  • It is the first major accident involving the latest version of Boeing’s popular narrow-body plane

CHICAGO: Boeing plans to hold a conference call with airlines on Tuesday morning to discuss systems on the 737 MAX model that crashed in Indonesia last month, according to four sources with familiar with the matter.
A Lion Air Boeing 737 MAX crashed in the Java Sea on Oct. 29, killing all 189 people on board, in the first major accident involving the latest version of its popular narrow-body plane.
After the crash, the US Federal Aviation Administration warned airlines that erroneous inputs from the anti-stall system’s sensors could lead the jet to automatically pitch its nose down even when autopilot is turned off, making it difficult for pilots to control.
American Airlines Group Inc. last week said it had been “unaware” of some functions of the so-called Maneuvering Characteristics Augmentation System (MCAS) designed to prevent the 737 MAX from stalling.
Indonesian investigators said the system was not detailed in Lion Air’s flight manual.
Bloomberg first reported on Boeing’s plans to hold a call with airlines on Tuesday. One of the sources familiar with the matter told Reuters that the call might be postponed.
Boeing last week said it had provided two updates for operators around the world that re-emphasize existing procedures to deal with situations relating to MCAS. Boeing declined to provide further comment.
In a message to employees on Monday, Boeing CEO Dennis Muilenburg said news reports that claimed the manufacturer withheld information on MCAS from airlines were “untrue” and the function had been described in the flight crew operations manual, according to aviation journalist Jon Ostrower.
In a memo on Friday, a United Airlines union said the carrier’s pilots were properly trained to handle an MCAS malfunction even though the system was not mentioned in a course for those switching from older models to the new jet.
A preliminary report on the Lion Air crash will be released on Nov. 28 or 29, according to Indonesian investigators who have analyzed the doomed jet’s flight data recorder.
However, divers have yet to locate the airline’s cockpit voice recorder, which would shed light on pilot interactions that are important for gaining a fuller picture of the circumstances of the crash.