Lira falls as Washington weighs sanctions against Turkey

US President Donald Trump is considering stricter sanctions against Turkey if Ankara insists on plans to purchase a Russian missile defense system, Bloomberg reported on Wednesday.

Citing people familiar with the issue, Bloomberg said that Washington is weighing three “sanctions packages,” the severest of which “would all but cripple the already troubled Turkish economy.”

It said that the option currently being favored most strongly would entail “targeting several companies in Turkey’s key defense sector under the Countering America’s Adversaries Through Sanctions Act... making it almost impossible for them to buy American components or sell their products in the US.”

Washington has already threatened to halt sales to Turkey of American-built F-35 fighter jets if it goes ahead with the purchase of the Russian S-400 system.

The report has already had a negative impact on the Turkish lira, which stood at 5.8750 against the dollar on Wednesday morning from Tuesday’s close of 5.8265.

“News that new sanctions are being assessed created selling pressure on the lira,” a treasury desk trader at one bank told Reuters.

“We can’t say the impact is that great because no concrete step is expected before the Trump-Erdogan talks. But in the period ahead, relations with the US will remain the main topic on the market’s agenda,” he added.