The Turkish lira has weakened to 5.86 against the dollar from its previous close of 5.8150 as investors weighed up a US warning that Turkey should expect more economic sanctions unless it hands over detained American pastor Andrew Brunson.
The lira has weakened 35% against the dollar this year as the deterioration in ties between the NATO allies fuelled losses driven by concerns over President Tayyip Erdogan's influence over monetary policy.
US Treasury Secretary Steven Mnuchin assured President Donald Trump at a cabinet meeting yesterday that sanctions were ready to be put in place if Mr Brunson, a pastor on trial in Turkey on terrorism charges, was not freed.
Mr Trump later said in a tweet the United States "will pay nothing" for Brunson's release, "but we are cutting back on Turkey!" He called Brunson "a great patriot hostage".
Turkey has taken advantage of the United States for many years. They are now holding our wonderful Christian Pastor, who I must now ask to represent our Country as a great patriot hostage. We will pay nothing for the release of an innocent man, but we are cutting back on Turkey!
— Donald J. Trump (@realDonaldTrump) August 16, 2018
Turkish officials say the case is a matter for the courts.
The US comments came after Turkey’s Finance Minister Berat Albayrak, Erdogan's son-in-law, assured investors yesterday that Turkey would emerge stronger from its currency crisis, insisting its banks were healthy and signalling it could ride out the dispute.
Economists gave Mr Albayrak's presentation a qualified welcome and the lira subsequently held firm.
The currency has rebounded strongly after hitting a record low of 7.24 at the start of the week, bolstered by central bank measures to support it and Qatar's pledge to invest $15bn in Turkey.
