Turkey's president calls lira plunge "plot", threatens to seek new alliances

A Kuwaiti man holds a one US dollar bill next to a five Turkish lira banknote at a currency exchange

His comments echoed those made by Turkey's President Recep Tayyip Erdogan over the weekend.

"But everything must be done to ensure an independent central bank", Merkel said during a news conference in Berlin when asked about the economic situation in Turkey.

"In a worst- case scenario involving total loss of local equity and any intergroup funding, we see a range of circa one-12 per cent of group equity losses for these banks", it said in a note.

The crisis has been sparked by a series of issues including a faltering economy-the central bank has defied market calls for rate hikes-and tensions with the United States, which has hit Turkey with sanctions over its detention of an American pastor. The US has responded by slapping financial sanctions on two ministers and later doubled steel and aluminum tariffs on Turkey.

His assurance came after Turkey's president blamed the lira's plunge on a plot against the country.

Turkish lira lost about 40% of their value this year, mainly because of concerns about Erdogan's influence on the economy, his calls for lower interest rates and worsening of relations with the US.

Fethullah Gülen, the leader of FETÖ group that launched the July 15, 2016 coup attempt killing 251 people and injured 2,200 others, also resides in USA state of Pennsylvania. It said it would take legal measures against them but did not say what these would be.

As President Recep Tayyip Erdogan lashed out at the U.S., took higher rates off the table and said he wouldn't accept an global bailout, traders pushed down Turkish assets in a selloff that spilled over to other developing economies.

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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.

CONTAGION FEARS: Emerging markets are falling out of favor due to problems in Turkey and Argentina.

Investors in lira are also concerned about Turkey's internal monetary policy. Erdogan accuses Washington of protecting coup plotters.

The moves will free up 10 billion lira, $6 billion, and $3 billion equivalent of gold liquidity in the financial system, the bank said.

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

Investors are anxious that Turkish companies could struggle to repay loans in dollars and euros - a debt pile that only grows as the lira falls.

He also rejected calls to switch to foreign currencies which he insisted was not in the Turkish nation's character and said would be "giving in to the enemy".

"An investigation has been launched according to Turkish Penal Law, Banking Law, Capital Markets Board regulations and related laws into people who displayed actions that threaten economic security through manipulative stories on media and operational social media accounts as part of the economic attacks that target the Republic of Turkey, its social peace, unity and economic security by the powers behind the [2016] coup attempt", the prosecutor's office said in a statement on August 13, according to the state-run Anadolu Agency.

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