President Recep Tayyip Erdogan on Tuesday said Turkey would boycott U.S. electronic goods like the iPhone in retaliation for punitive sanctions from Washington, as the Turkish lira finally clawed back some ground after going into a tailspin over the tensions.
Shares of US lenders - Citigroup, JPMorgan, Wells Fargo, Bank of America, Goldman Sachs - rose between 0.20 percent and 1 percent.
TURKISH TURMOIL: Investors are uneasy over whether Turkey's government can cope with a plunging currency, a diplomatic spat with Washington and other problems. Shares in Europe's major banks also lost ground.
The bank cut the lira reserve requirement ratio, a cash buffer held by banks, by 250 basis points for all maturity brackets and lowered reserve requirement ratios for non-core FX liabilities by 400 bps for maturities up to three years.
The bank released a statement Monday saying it would "provide all the liquidity the banks need".
Although the lira enjoyed a small respite on Tuesday, investors say measures taken by the Central Bank on Monday to ensure liquidity fail to address the root cause of lira weakness.
The Dow Jones Industrial Average added 77 points, or 0.3 percent, to 25,265. It was trading at 6.89 per dollar at 0758 GMT.
Separately, the Istanbul and Ankara prosecutor's offices launched investigations into individuals suspected of being involved in actions that threaten Turkey's economic security, broadcaster CNN Turk and state news agency Anadolu reported.
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Albayrak said Tuesday Turkey would press ahead with its action plan to prop up the lira against the dollar, calling for a trade that is conducted "in our own currency". And if he does seek compromise, analysts wonder, will it be too late to undo the economic damage? "Textbook stuff of how not to manage a crisis", he wrote on Twitter.
Erdogan also said the country is under an economic "siege" that has nothing to do with its economic indicators, insisting that Turkey will overcome the "attack" on its economy. It pared losses after Albayrak's comments and stood at 7.08 at 2040 GMT on Sunday, Reuters said.
Speaking to a crowd of supporters in the Black Sea coastal city of Trabzon, Erdogan said: "What is the reason for all this storm in a tea cup?"
The lira's free-fall was the result of a plot and did not reflect economic fundamentals, he said. There is no economic reason.
Addressing a conference in Ankara gathering Turkish ambassadors, Mevlut Cavusolgu on Monday called on the United States to "remain loyal to ties based on traditional friendship and North Atlantic Treaty Organisation alliance" with Turkey.
At issue is the Central Bank's refusal to raise interest rates in order to tackle double-digit inflation, with Erdogan believing that interest rates are the number one killer of the economy.
The ministry said Monday it initiated legal investigations against 346 social media accounts "which posted content provoking the dollar exchange rate".