Crumbs. Foreign exchange firm International Currency Exchange (ICE) says it ran out of Turkish lira on Tuesday, after a surge in demand.

ICE says that orders for Turkish Lira to its UK website www.iceplc.com jumped by 24,000% compared to the average last month.

Most of its UK stores have sold out of lira, but you can still get your hands on them at London Luton Airport and Doncaster Airport.

This surge in demand indicates that many British tourists have decided to take a last-minute holiday to Turkey, which are much cheaper thanks to the currency crisis.

One pound is currently worth 7.7 lira on the international currency exchanges, up from 6 lira at the start of July.

Louis Bridger, general manager at ICE, says there has been “unprecented demand” for the lira.

We are working closely with our suppliers and the Turkish Central Bank to increase our stock however the demand is so high that it’s unlikely we will be able to sell Turkish Lira online until tomorrow morning. We apologise if any customers are experiencing delays when purchasing their currency.

For people travelling to Turkey who are unable to get their hands on Lira, they can take alternative major currencies such as US dollars and Euros which are easily exchangeable when they are out there.”

Turkish trade minister Ruhsar Pekcan says the new tariffs will “protect the rights of Turkish companies”, as well as retaliating against America’s tariffs on steel and aluminium

Pekcan also insisted Turkey isn’t dependent on the US, saying:

The United States is an important trading partner, but it is not our only partner. We have other partners and alternative markets.”

(via Turkey’s Anadolu news agency)

Hiking tariffs won’t help Turkey tackle its key financial challenge — to keep servicing its foreign loans.

Turkish companies owe almost $300bn in foreign denominated debt. That includes a surge in borrowing by Turkish banks, who have tapped foreign wholesale markets to help fund its credit boom.

The slide in the lira in recent weeks has pushed up the cost of refinancing those loans (finding a new lender when an existing debt matures).

Jurgen Odenius, Economic Counsellor at PGIM Fixed Income, explains:

The root cause of the crisis lies in a leverage-financed domestic demand boom that increased the external financing requirement of Turkey’s corporations, banks, and government to an estimated $229 billion this year. Most of these liabilities fall on the private sector, mainly banks and corporations; the sovereign owes only $11 billion. What makes the problem worse is that the external financing requirement is trending up over the medium term, indicative of a long-standing over-reliance on foreign-funded leverage.

As the lira collapses, this lending boom now is undoubtedly grinding to a sudden halt. Foreign financiers, whether they exist as banks or bond investors, are re-assessing the outlook and related repayment prospects. Western European banks from Spain and France are particularly exposed, with over half of the debt owed to them. The trouble is that the Turkish financial system and the corporate sector are short dollars.

GAM’s Paul McNamara says the issue is crucial:

Back in Turkey, the government is preparing for show of support from Qatar.

The emir of Qatar, Sheikh Tamim bin Hamad al-Thani, left Doha to travel to Ankara for a “working visit” with president Erdoğan.

The Gulf Times says they will discuss bilateral relations between Qatar and Turkey.

They will also examine:

“means of strengthening the existing strategic cooperation between the two countries in various fields, in addition to a number of issues of mutual interest.

Turkey and Qatar are close allies. There is a Turkish military base in the Gulf state, and Turkey was quick to send food aid to Qatar when Saudi Arabia imposed a blockade last year.

However, the wealthy Gulf state might be reluctant to anger America by providing Ankara with financial aid at this time.

Turkish media are reporting that a court has rejected an appeal for the release of American pastor Andrew Brunson.

Hurriyet newspaper said the court in Izmir rejected the appeal from Brunson’s lawyer, but that a higher court would review the appeal.

If Brunson remains under house arrest, it’s hard to see US-Turkey relations improving….

Economist Jens Bastian fears for Turkey’s financial prospects:

Robert Ward of the Economist Intelligence Unit says Turkey needs a ‘decisive orthodox’ response to the currency crisis (ie, a chunky interest rate hike), rather than tariffs on US goods.

Bloomberg has calculated that Turkey’s new tariffs cover around $1bn of US imports.

That’s similar to the amount of Turkish steel and aluminium exports that were subjected to higher tariffs by President Donald Trump last week, suggesting this genuinely is a tit-for-tat response.

The lira’s recovery comes as Turkey’s financial regulators impose new restrictions on the country’s banks.

These rules make it harder for banks to buy and sell foreign exchange derivatives with overseas banks.

That will prevent some investors from betting against the lira.

Reuters has the details:

Turkish banking watchdog BDDK on Wednesday said it is cutting the limit for Turkish banks’ forex swap, spot and forward transactions with foreign banks to 25 percent of a bank’s equity.

The BDDK had said on Sunday that the limit would be 50 percent of the bank’s equity.

n a statement, the BDDK said the rate will be calculated daily and new transactions will not be performed or renewed until the current excess of the amount is realised at a quarter of a bank’s capital.

Paul McNamara, investment director at asset manager GAM, says this squeeze will have helped the lira recover:

Investor Martin Enlund points out that it will also make it harder for Turkish investors to protect themselves from the crisis:

The Turkish lira has risen by 2.5% in early trading, after Ankara hit the US with fresh tariffs.

It’s currently changing hands at below 6.2 lira to the dollar, up from around 6.35 lira last night, extending Tuesday’s recovery.

That’s still an extremely weak position compared to four months ago, though, when one dollar was only worth 4 lira.