Turkey’s currency crisis gets worse with fresh 11% plunge

Turkey’s currency nosedived again Monday as fears deepened about the country’s ability to deal with a crisis that has rattled markets around the world.

The Turkish lira dropped as much as 11% against the dollar in morning trading in Asia. It had already plummeted more than 20% last week as a political clash with the United States intensified and investors fretted about the Turkish government’s lack of action to tackle the problems plaguing its economy.

The lira’s tailspin has unsettled global markets, with shares of European banks coming under particular pressure because of concerns over the lenders’ exposure to Turkey. On Monday, benchmark stock indexes in Tokyo, Hong Kong and Shanghai were all down more than 1.5% in late morning trading.

Turkish President Recep Tayyip Erdogan has dismissed calls for the country to raise interest rates to try to ease the crisis — and has lashed out at the United States.

“We will not give in,” Erdogan said in a speech Sunday. “If you come at us with your dollars then we will find other ways to do business.”

Related: How a currency meltdown in Turkey threatens Europe

Economists are warning that if confidence isn’t restored quickly, Turkey could lurch into a recession and debt crisis requiring a bailout from the International Monetary Fund.

“Investors are clearly concerned that Turkey’s government won’t act (or allow the central bank to act) to shore up the currency, and fears are mounting that this could result in a crisis in Turkey’s banking sector,” William Jackson, chief emerging markets economist at research firm Capital Economics, wrote in a note to clients Friday.

The lira is now down around 45% against the dollar since the start of the year, making it far harder for Turkish companies to pay back loans they have taken out in the US currency.

Meanwhile, the US government is using the lira crisis to ramp up pressure on Turkey over its detention of an American pastor.

“I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar!” President Donald Trump tweeted Friday. “Our relations with Turkey are not good at this time!”

The Turkish government’s efforts to soothe investors’ concerns have so far failed.

Finance Minister Berat Albayrak said in an interview with Turkish newspaper Hurriyet on Sunday that the government has drafted an economic action plan that it will start implementing on Monday morning.

Albayrak, who is Erdogan’s son-in-law, didn’t specify what the plan would involve. He said the country’s banks and banking regulator “will take the necessary measures quickly.”

But his comments did little to help the Turkish currency. One dollar now buys about seven lira, compared with less than four at the start of the year.

Investors are waiting for “a convincing response from the central bank and government,” Rob Carnell, an economist at investment bank ING, said in a note to clients Monday.