ISTANBUL: Turkey’s central bank on Monday failed to halt the precipitous plunge of the lira with a raft of measures aimed at soothing markets, as President Recep Tayyip Erdogan accused the United States of seeking to stab its Nato ally “in the back”.

A dispute between Turkey and the US — which reached new intensity over the detention of an American pastor — has hammered the lira and also raised questions over the future partnership between Washington and Ankara.

Meanwhile, Pakistan said that it would stand by its long-term ally Turkey and voiced opposition to the threats of imposition of unilateral sanctions by the US over arrest of the American pastor.

As the lira plunged another seven per cent in value, investors fretted over potential economic contagion from Turkey, particularly to European banks.

The Turkish lira had tumbled some 16pc against the dollar on Friday as US President Donald Trump said he had doubled tariffs on steel and aluminium from Turkey. “We are together in Nato and then you seek to stab your strategic partner in the back. Can such a thing be accepted?” Erdogan said at a conference in the capital Ankara.

Islamabad stands by Ankara, voices opposition to American sanctions

After Mr Erdogan’s speech, the lira was trading back at 6.9 to the dollar, a loss of over 7pc on the day, recovering from even sharper losses in earlier Asian trade where it struck a record low of 7.2362 to the greenback.

In its first statement since what was dubbed “Black Friday” in Turkey, the central bank said it was ready to take “all necessary measures” to ensure financial stability, promising to provide banks with “all the liquidity” they need.

The bank also revised reserve requirement ratios for banks, in a move also aimed at staving off any liquidity issues.

But to the dismay of markets, the statement gave no clear promise of rate hikes, which is what most economists and analysts say is needed to ease the crisis.

Mr Erdogan indicated he was in no mood to offer concessions to the US in one of the worst spats between the two Nato allies in years. He said Turkey was facing an “economic siege”, slamming the currency movements as an “attack against our country”.

The Turkish leader has been sanguine over the punitive measures announced by the US, saying that while Turkey’s relationship with Washington is at stake it will look for other partners.

Pakistan urges dialogue

Meanwhile, spokesperson for the FO in Islamabad said in a statement: “Pakistan, in principle, is opposed to imposition of unilateral sanctions against any country. The solution to any and all issues should lie in dialogue, mutual understanding and goodwill.”

“Any steps or actions to the contrary only undermine the peace and stability and make the solution to a problem more difficult and intractable,” he said.

The FO spokesperson said Pakistan acknowledged and greatly appreciated Turkey’s invaluable role towards regional and international peace and stability.

“The people and the Government of Pakistan reiterate their strong support for the Government and the people of Turkey in their quest for peace and prosperity, and as always, will continue to stand by them towards the achievement of these shared goals,” the statement said.

Published in Dawn, August 14th, 2018