US President Donald Trump dramatically increased the pressure on Turkey on Friday, threatening to double tariffs on the country's aluminium and steel exports, leading to a fresh slump in the already tumbling lira.
President Recep Tayyip Erdogan's current dash for growth coupled with unorthodox pronouncements on monetary policy - including that lower rates can bring down inflation - have put him on a collision course with markets.
A new bout of selling Friday on increased strains with the United States forced the lira over six against the dollar for the first time, with the currency at one point shredding a quarter of its value in a single day.
Securing the release of Brunson, arrested in 2016, is a top priority for the United States, and it is also tussling with Turkey over the detention of three locally employed USA embassy staff, trade issues and differences over Syria. Over the last year the Lira has lost 33% of its value and its cost of servicing its debt has risen to the highest level in 9 years.
"Their currency, the Turkish lira, slides rapidly downward against our very strong dollar!"
Erdogan also warned that Turkey could start looking for new allies if Washington damaged its relations with Ankara. -Turkish relationship, a deterioration made worse by Turkey's worsening human rights record and increased cooperation with Russian Federation and Iran in Syria.
Turkey exported $1.04 billion (€0.91 billion) worth of steel and $60 billion worth of aluminum to the United States in 2017, according to the Hurriyet newspaper.
However, the White House later clarified that Trump's announcement "authorized the preparation of documents" to raise the tariffs.
"Over the years, Turkey rushed to America's help whenever necessary", he said, listing some of occasions the two countries acted together.
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Meanwhile, Ankara is wanting the extradition of Fethullah Gulen, a Pennsylvania-based cleric who is blamed by Mr Erdogan for masterminding the 2016 coup. Trump said on Twitter.
The Turkish President, Recep Tayyip Erdogan, took a combative stance in an earlier press conference, pledging to "overcome this economic war".
"The surge in Turkish inflation, bond yields and the even more dramatic plunge in Turkey's exchange rate in 2018 suggest that the country could now be in danger of heading for a bust", Berenberg economist Carsten Hesse said.
Prior to Trump's announcement, the Turkish lira fell to its lowest point ever against the USA dollar on Friday.
The lira sell-off has deepened concern over whether over-indebted Turkish companies will be able to pay back loans taken out in euros and dollars after years of overseas borrowing to fund a construction boom under Erdogan.
Turkey's economy is regarded as fragile because of its high debt, which the global Monetary Fund estimates is 50 percent of its gross domestic product.
Last week the U.S. government announced sanctions against Turkey's interior and justice ministers, to which Ankara responded by freezing the assets of two American officials in Turkey.
Brunson, an evangelical Presbyterian from North Carolina, was jailed for allegedly supporting a group that Turkey blames for the failed coup.
"Confidence needs to be regained". Hard currency debt issued by Turkish banks suffered similar falls.
Albayrak, who formerly served as energy minister, on Friday announced what he has described as a "new economic model" for Turkey but he focused on macro-economic issues and steered well clear of tackling the currency crisis.