Turkish lira hits record low after U.S. says reviewing duty-free access

By Ezgi Erkoyun, Can Sezer

ISTANBUL (Reuters) - The Turkish lira tumbled to a record low against the dollar on Monday, after the Trump administration said it was reviewing Turkey’s duty-free access to the U.S. market, a move that could affect some $1.66 billion (£1.28 billion) of Turkish exports.

The U.S. Trade Representative’s review, announced on Friday, came after Ankara imposed retaliatory tariffs on U.S. goods in response to American tariffs on steel and aluminium.

Relations between the NATO allies have steadily worsened, strained by differences on Syria policy and an escalating row over the trial in Turkey of an American Christian pastor, exacerbating the sell-off in the lira.

The currency TRYTOM=D3 has lost 27 percent of its value this year, battered by concern about President Tayyip Erdogan's drive for greater control over monetary policy. On Monday, it fell 2 percent to a record low of 5.1920 against the dollar. By 1157 GMT it was at 5.1710.

“The best bet now is to expect further weakness in the lira — Turkey really doesn’t need this,” said Per Hammarlund, chief emerging markets strategist at SEB.

“They should be doing more to support the lira, but in my view this will continue for a while longer and the lira will take another beating here.”

(Graphic: Turkish lira hits record low - reut.rs/2Mb7YGU)
Reuters Graphic

Reuters Graphic
The U.S. Trade Representative’s office said the review could affect $1.66 billion worth of Turkish imports into the United States that benefited from the Generalised System of Preferences programme last year, including motor vehicles and parts, jewellery, precious metals and stone products.

It was unclear whether any large, listed Turkish firms would be hit. Auto parts suppliers tend to be smaller, unlisted companies. Istanbul's main index .XU100 fell 1.7 percent.

“This review will impact many companies exporting to the United States, but it will have a very small impact on the income streams of these companies,” said an analyst at a local brokerage, who declined to be named.

Data from the U.S. International Trade Commission showed that the biggest beneficiary of the duty-free programme were auto and auto parts makers, with exports of nearly $250 million last year. That was followed by precious stones and metals, at nearly $210 million.

A USTR spokeswoman said the review was unrelated to the case of Andrew Brunson, an evangelical pastor who has lived in Turkey for more than two decades and is charged with supporting the group Ankara blames for an attempted coup in 2016.

(Graphic: Turkey Money Markets - reut.rs/2MbaxJ3)
Reuters Graphic
Reuters Graphic
Washington last week imposed sanctions on Erdogan’s justice minister and interior ministers, saying they played leading roles in organisations responsible for Brunson’s arrest.

Erdogan said Turkey would retaliate by freezing assets of the U.S. interior and justice ministers.

“For a meaningful recovery in the lira, we’re going to have to watch the news flow,” said one local banker, who declined to be identified.

Additional reporting by Claire Milhench in London and Behiye Selin Taner in Istanbul; writing by Ali Kucukgocmen; editing by David Dolan and Robin Pomeroy