A new pressure on the Turkish lira is expected after Russia announced earlier this week it would begin deliveries of its air defence missile system to Turkey, something which has been later confirmed by Mr. Recep Tayyip Erdogan, the Turkish president. In his announcement, Mr. Erdogan said the deal was done and the deliveries would start in July. The move from Turkey for Russian military equipment has been strongly opposed by the US who say the purchase of Russian missile system threatens NATO security.
If the deliveries go ahead, the US has warned Turkey it would end its role as a partner in the F-35 fighter jet program. It has also warned of potential sanctions which could lead to a sell-off in Turkey’s financial markets and further destabilize the Turkish currency.
The lira fell sharply last year on a mixture of political and economic turmoil and the worsening relationship between Ankara and Washington. The currency has recovered some of its lost ground but has depreciated again this week. Against the USD, the lira has fallen 1.6% w-o-w and remains down 20% compared to the same time last year.
The weakness in the lira would affect a large number of commodities for which Turkey is an important exporter, such as hazelnuts, dried fruits, grapes, apricots, apple juice or steel.