Stocks drop on Monday as Turkey lira crisis continues

Turkish lira update market drop

"Our institutions will take necessary action from Monday in order to relieve the markets", he said, noting that the plan would center on "the state of our banks and the small and medium-size enterprises" most affected by the lira's fall.

Investors globally headed for safe harbors including the USA dollar as the selloff in Turkey spread to emerging markets overseas, including South Africa's rand.

Turkey's situation is among the most precarious among emerging markets because so much of its growth was fueled with debt in foreign currencies.

Japan's Nikkei lost 1.6 percent, China's blue-chip index lost 1.4 and Hong Kong stocks were also down 1.6 percent. Major European markets were down around 0.5%, with shares in banks including Spain's BBVA and Italy's Unicredit sliding more than 4%.

He has threatened to seek new alliances - a veiled hint at closer ties with Russian Federation - and warned of drastic measures if businesses withdraw foreign currency from banks.

"If we look back at Greece, all the credit spreads blew out and that transmits across to Aussie banks", he said.

Zarif met repeatedly with then USA secretary of state John Kerry during the negotiation and implementation of the 2015 agreement - but those relatively warm ties were abruptly ended when the Trump administration came to power.

The lira hit a record low of 7.23 per dollar late Sunday after Erdogan remained defiant in his economic policies and the standoff against the United States, a North Atlantic Treaty Organisation ally.

The currency tumbled on worries over Turkish President Tayyip Erdogan's increasing control over the economy and deteriorating relations with the United States.

Meanwhile, the U.S. government is using the lira crisis to ramp up pressure on Turkey over its detention of an American pastor.

Turkey's Erdogan condemns 'shameful' United States over detained pastor
Trump's "jubilation in inflicting economic hardship on its North Atlantic Treaty Organisation ally Turkey is shameful", he wrote. Erdogan downplayed the currency crisis in a speech on Friday, advising Turks not to be anxious over exchange rate fluctuations.

The lira "slides rapidly downward against our very strong Dollar!"

In an opinion piece Sunday, CNN National Security Analyst Samantha Vinograd wrote that Turkey's being a North Atlantic Treaty Organisation member "hasn't stopped (Erdogan) from cozying up to Russian President Vladimir Putin and buying defense assets from him (a USA sanctions violation) or voicing contentment over Russia and Turkey's ongoing cooperation in the energy and defense industry sectors during a conveniently timed phone call on Friday".

"They tell us to release the priest by Wednesday 6:00 pm, otherwise the sanctions will begin", said Erdogan, adding Turkey was not a country to agree to such requests.

In the interview with Hurriyet newspaper, Albayrak described the lira's weakness as "an attack" - echoing Erdogan, who is his father-in-law.

"The Central Bank will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary", the Central Bank of the Republic of Turkey said. It also said it would slash the amount of funds that banks are required to hold in reserve. "These banks are thought to have the greatest exposure to Turkish debt and their loans are unhedged".

Iran too has suffered a major decline in its currency this year - in part due to U.S. abandonment of the nuclear deal - with the rial losing more than half its value against the dollar since April.

In May, the central bank raised interest rates to support the lira in an emergency move, but it did not tighten monetary policy at its last meeting.

Erdogan's comments on interest rates, along with his recent appointment of his son in law, Albayrak, as finance minister have intensified concerns the central bank is not independent.

"We did not and will not compromise the rules of free market economy", Erdogan said in a speech Monday.

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