Turkey cracked down on short selling of the lira on Wednesday, helping its currency recover against the dollar as Ankara declared that Qatar had offered it billions of dollars of support, Financial Times reports.

The Turkish currency rose on the day by about 5 per cent to TL6.04 against the dollar in afternoon trading after Turkish authorities took measures to curb banks’ ability to supply the currency to foreign financial institutions. At the beginning of the week, the lira had fallen to an all-time intraday low of TL7.2149.

Signaling that Ankara was unwilling to back down from the confrontation with the U.S. that exacerbated the currency’s slide by more than 20 per cent last week, Turkish authorities also announced new tariffs on U.S. imports. It doubled tariffs on a range of U.S. goods, lifting duties for alcohol to 140 per cent, cars to 120 per cent and leaf tobacco to 60 per cent. Tariffs were also doubled on cosmetics, rice and coal.

Turkish president Recep Tayyip Erdogan has refused to cave in to U.S. demands to release Andrew Brunson, an American pastor whose detention has prompted President Donald Trump to impose sanctions on two Turkish cabinet ministers.

“We don’t support Turkey’s decision to retaliate against the US protecting our national security interest,” White House press secretary Sarah Sanders said, in a reference to the imposition by Washington of tariffs, which were predicated on a conclusion that steel imports were damaging U.S. security.

While Erdogan has refused to bow to the U.S. request to free Brunson, he has also been unwilling to back an increase in headline interest rates to bolster the lira. The White House said it was paying attention to the economic crisis in Turkey, but said the decline in the currency was not something that was the fault of Washington.

“Certainly, we are monitoring the situation with respect to the Turkish economy and the decline of the lira. But Turkey’s economic problems are part of a long-term trend… and not the result of any actions that the US has taken.” Sanders pointed out.

A spokesman for Erdogan stated on Twitter that Qatar, the world’s richest nation in per capita terms and a strong ally of Turkey, had pledged $15bn in direct investment in the country. Another Turkish official said this would “provide rapid funds to the financial markets and the banks”. Total foreign direct investment in Turkey last year was $10.83bn, according to the country’s economy ministry.

The announcement came after Erdogan played host to the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, for a working lunch in Ankara. Qatari officials could not immediately be reached for comment, but Turkey has strengthened its economic, political and military ties with the Gulf state since Saudi Arabia and three Arab allies imposed a regional blockade on Qatar last year.

Sheikh Saif bin Ahmed Al Thani, director of Qatar’s government communication office, said Doha’s investments in Turkey “confirms that Qatar continues to promote economic co-operation between the two countries”. “We have full confidence in the strength of the Turkish economy,” he said on Twitter.

Banking analysts have warned that the weakening lira risks wiping out capital buffers held by the banks as the value of their lira-based equity declines against their foreign currency loans. The banking authority also sought to rein in consumer spending, by shortening the maximum maturity on consumer loans and placing new limits on credit card installments.

Such steps could help cool inflation, now running at 16 per cent, and reduce the country’s hefty current account deficit. But in a more confrontational move, Ankara also raised tariffs on American cars, alcohol and cigarettes, escalating the rift with Trump.

Fuat Oktay, Turkey’s vice-president, announced the tit-for-tat measures on Twitter, in what he said was retaliation for “deliberate attacks” on the Turkish economy by the U.S. administration.

Trump doubled tariffs on imported Turkish aluminium and steel last week after Washington’s earlier imposition of sanctions on the Turkish cabinet ministers in the dispute over Brunson, FT adds.

On Wednesday, a court in Izmir rejected Brunson’s appeal against house arrest. A further appeal would now be lodged with a higher court, Brunson’s lawyer said.

U.S. vice-president Mike Pence, also an evangelical Christian, tweeted that Brunson was innocent and that justice demanded his release. “Turkey would do well not to test @POTUS Trump’s resolve to see Americans who are wrongfully imprisoned in foreign lands returned home to the United States,” Pence wrote.

Source: Financial Times

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