Turkey financial crisis: Lira rebounds after Qatar pledges $15bn investment but US tensions rumble on

Analysts say President Erdogan now reaping benefits of standing by Doha in recent Saudi Arabia spat

The Turkish lira rebounded from record lows on Thursday after Qatar pledged a $15bn (£12bn) investment for the country, but analysts warned US tensions remain a risk to the economy.

Turkey’s lira, which plunged against the dollar last week to become the worst performing currency of the year, recovered by 5 per cent on Wednesday, up 20 per cent from its record low of 7.23 per dollar.

The recovery was partly aided by Qatar’s pledge of $15bn in direct investment.

Jasper Lawler at London Capital Group said the move had gone down well with investors, and added: “The pledge of cash by the oil rich state serves to remind us the of the key geographical position of Turkey. Turkey’s President Erdogan is now reaping the rewards for standing by Doha in its recent spat with Saudi Arabia.”

The lira was also boosted by actions taken by the Turkish Banking Regulation and Supervision Agency to limit short-selling the currency.

However, Hussein Sayed, chief market strategist at FXTM, warned that “such measures may only provide short-term relief and policy makers need to address the longer-term challenges that will face the country”.

“With inflation expected to skyrocket in the coming months, a current account deficit that exceeds $50bn and more than $16bn of debt maturing in 2019, investors fear that the currency crisis will turn into a debt crisis,” he added.

“Even if tensions between the US and Turkey are resolved, investors still need to see serious fiscal and monetary measures to restore confidence.”

Turkey’s President Recep Tayyip Erdogan has accused Donald Trump of undermining the value of the lira with a “political, underhand plot”, and said the US leader was waging “economic war against the entire world”, after Mr Trump doubled tariffs on steel and aluminium.

The US and Turkey are also at loggerheads over Ankara’s continued detention of a US pastor, Andrew Brunson, who was arrested in 2016 and charged with having terrorist connections. Mr Brunson is also alleged to have been connected to the failed coup against President Erdogan two years ago.

Analysts at trader IG said: “The breakdown in relations between Turkey and the US remains a key concern, yet with the lira seemingly stabilising over the course of the week, it seems the measures being brought in by the Turkish have held arrest its decline for now.”