Erdogan: "Exchange dollars, euros and gold for Turkish lira"

Turkish President Erdogan made another statement on Friday call to its people to bring gold, dollars and euros to the bank and exchange them for Turkish lira. In a speech, he said that Turkey has become embroiled in a "national struggle" against economic enemies, without making clear who they are. He did, however, refer to the U.S. currency, saying that the dollar should not block Turkey's path.

According to Erdogan, it is of national interest that Turks heed his call to surrender foreign currency and gold, but that plan seems to have little support among the population. After Erdogan's speech, the Turkish lira fell sharply again, to an exchange rate of 6.6 lira against the dollar. To put that in perspective: At the beginning of the afternoon, there was still an exchange rate of about 6 on the boards, and at the beginning of the week just over 5 against the dollar. This means that the Turkish lira has depreciated more than 20% this week.

Higher import duties for Turkey

The negative news surrounding the Turkish lira was reinforced by the announcement of even higher import duties from the United States. President Trump announced that he will lift tariffs on aluminum and steel from Turkey. double from 10 and 25 percent to 20 and 50 percent respectively. This measure and the unfortunate timing for Turkey is indicative of the deteriorating relationship between the two countries. Turkey did send a delegation to Washington this week to discuss the import tariffs, but that did not yield any results.

Erdogan's hostile tone towards the dollar is clearly not tolerated in Washington. The question is how many resources Turkey has in reserve to combat the looming currency crisis. The central bank has about $80 billion in foreign exchange reserves and has a gold reserve of more than 200 tons. Banks in Turkey also have a Significant amount of gold.

Gold as a safe haven

The precious metal is seen as a kind of safe haven and has certainly lived up to its reputation as such in recent months. The price of gold in Turkish lira has risen from around 200,000 to 250,000 lira per kilogram this week alone. In two years, the price of the precious metal in the local currency has even doubled. This makes it much more interesting for Turks to buy gold or foreign currency than to save in the Turkish lira.

Gold price in Turkish lira (Source: Goldprice.org)

This contribution was made from Geotrendlines