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Abu Dhabi, UAEWednesday 12 December 2018

Turkish lira tumbles to 5.86 over threat of more US sanctions

Slump followed a rally after Qatari pledge to invest $15bn

Customers wait outside a restaurant in Istanbul. The lira has weakened 35 per cent against the dollar this year (Photo by Chris McGrath/Getty Images)
Customers wait outside a restaurant in Istanbul. The lira has weakened 35 per cent against the dollar this year (Photo by Chris McGrath/Getty Images)

The Turkish lira weakened to 5.86 against the dollar on Friday from its previous close of 5.8150 as investors weighed up a US warning that Turkey should expect more economic sanctions unless it hands over detained American pastor Andrew Brunson.

The lira has weakened 35 per cent against the dollar this year as the deterioration in ties between the Nato allies fuelled losses driven by concerns over President Tayyip Erdogan's influence over monetary policy.

US Treasury Secretary Steven Mnuchin assured President Donald Trump at a cabinet meeting on Thursday that sanctions were ready to be put in place if Mr Brunson, a pastor on trial in Turkey on terrorism charges, was not freed.

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Read more:

US says more sanctions await if Turkey does not free pastor

Qatar's pledge of $15 billion puts Doha on the wrong side of Washington

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Trump later said in a tweet the United States "will pay nothing" for Mr Brunson's release, "but we are cutting back on Turkey!" He called Mr Brunson "a great patriot hostage." Turkish officials say the case is a matter for the courts.

The US comments came after finance minister Berat Albayrak, Mr Erdogan's son-in-law, assured investors on Thursday that Turkey would emerge stronger from its currency crisis, insisting its banks were healthy and signalling it could ride out the dispute.

Economists gave Mr Albayrak's presentation a qualified welcome and the lira subsequently held firm. The currency has rebounded strongly after hitting a record low of 7.24 at the start of the week, bolstered by central bank measures to support it and Qatar's pledge to invest $15 billion in Turkey.