Turkish lira rises as markets refuse to take Trump's tariff threats seriously – CNBC, CNBC

DUBAI – Turkish assets are breathing a sigh of relief after tariffs threatened by President Donald Trump overAnkara’s military offensive in Syriacame up less serious than markets had expected.

Turkey’s lirarose in Tuesday morning trading on the back of astatement by Trump promising a 50% tariffon Turkish steel imports and a halt to trade negotiations between Ankara and Washington – penalties that analysts are calling “window dressing.”

The dollar was down 1% against the lira for the session, with the Turkish currency trading at 5. 8628 per dollar at 8 am

The tariff threats are mere “window dressing from Trump,” said Timothy Ash, senior emerging markets strategist at Bluebay Asset Management. “Minimal sanctions. A few individuals. A trade deal which was years off anyway. And steel tariffs up to 50% – Turkey hardly exports any (steel to the US) anyway, “Ash said in an emailed note.

” Likely relief in Turkish markets – they could have been much worse. “

The lira was labeled theworld’s worst performing major currencyin the second week of October as sanctions stress weighed on Turkish assets. Trump has beenthreatening to “totally obliterate”Turkey’s fragile economy over President Recep Tayyip Erdogan’s military offensive into northern Syria against US-backed Kurdish forces – an operation Trump essentially greenlighted with his shock announcement to withdraw US troops from the area and hand responsibility for dealing with remaining Islamic State fighters to the Turks.

“These appear to be relatively light sanctions – meant to appease Congress without sundering Trump’s relations with Erdogan , “Charlie Roberston, global chief economist at Renaissance Capital, told CNBC.

The agreement between the two countries came after a phone call between Trump and Erdogan, the contents of which are not publicly known.Widespread bipartisan criticismfollowed Trump’s announcement, described by numerous lawmakers and security officials as an abandonment of America’s Kurdish allies governing the region after they lost heavy casualties helping the US drive out ISIS.

This prompted Trump to threaten Turkey with sanctions if the country went too far in attacking the Kurdish forces. Ankara views the Kurdish fighters, who were vital in driving ISIS out of Syria alongside American forces, as terrorists and hasopenly expressed its aimtocrush their presence in northern Syria.

” The United States will aggressively use economic sanctions to target those who enable, facilitate, and finance these heinous acts in Syria, “Trump’s statement said Monday. “I am fully prepared to swiftly destroy Turkey’s economy if Turkish leaders continue down this dangerous and destructive path.”

No stranger to volatility, the lira had previously come down 5% this month against the dollar on sanctions worries, and lost some 40% of its value against the dollar in 2018 over controversial domestic monetary policy moves and a diplomatic fight with the US that led to destabilizing tit-for-tat sanctions threats.

Turkey’s offensive in Syria, marked by airstrikes and artillery shelling, is now in its seventh day amidreports of human rights atrocities,ISIS jailbreaksand mass fleeing of civilians. The UN says 130, 000 people have already been displaced, and Kurdish forces say more than 200 have been killed. Pro-Turkish forces have cut off the main road between Syria’s east and west Kurdish-held territory, blocking the main highway to the Kurdish city of Kobani where U.S. troops are based.

Meanwhile, Republican and Democratic lawmakers last weekintroduced a sanctions bill on Turkeythat they say should have a veto-proof congressional majority if rejected by the president.

Of Monday’s less-harsh-than-expected tariff threats, Robertson said, “While this should be helpful for Turkish assets, markets will stay jittery, as they can’t be sure this takes enough pressure off Trump.”