August 6 was another very long day for the Turkish lira. Since March, a neverending flow of negative data and events has almost without pause undermined the currency—down more than a quarter against the dollar in the year to date—and the latest trading day proved no exception.

During early trading hours, the Turkish lira (TRY) tested new record weak rates of above 5.19 against the USD with the deterioration thought to be related to the US Trade Representative’s move to review Turkey’s eligibility to participate in the Generalized System of Preferences (GSP) programme and to the expected announcement by the US later on in the day on the first wave of renewed heavy sanctions against Iran—a policy that is bound to have ramifications for the economy of neighbouring Turkey.

The day then saw the Turkish central bank move to support the sinking lira. It said in a written statement that it was cutting the upper limit for the FX maintenance facility within the reserve options mechanism to 40% from 45%, a move that would provide $2.2bn of liquidity to local lenders. The TRY gratefully moved below 5.16.

However, the arrival of US President Donald Trump on the news scene—and his strong statement targeting those of Iran’s trade partners who are minded to continue doing business with the Iranians despite the commencement of sanctions—proved the last straw for the lira, which those traders with memories of less stressful days will recall bought a dollar at a rate of around 2.0 as recently as 2014. The local currency sank to yet another all-time low level against the USD, with one dollar fetching as much as 5.4187 by 23:40 Istanbul time. Losses were trimmed to 5.2893 by 01:30 on August 7.

“The Trump Administration intends to fully enforce the sanctions reimposed against Iran, and those who fail to wind down activities with Iran risk severe consequences,” the Trump said in his statement.

“I am pleased that many international firms have already announced their intent to leave the Iranian market, and several countries have indicated that they will reduce or end imports of Iranian crude oil. We urge all nations to take such steps to make clear that the Iranian regime faces a choice: either change its threatening, destabilizing behavior and reintegrate with the global economy, or continue down a path of economic isolation,” Trump added.

Turkish officials, including President Recep Tayyip Erdogan, have reiterated repeatedly that Turkey opposes US sanctions on Iran and is under no obligation to implement them.

As the row over the detention and prosecution of US Pastor Andrew Brunson between Erdogan and Trump’s administations continues, with tit-for-tat sanctions now in play, Turkey is expected to find it hard to gain waivers from the US for its energy imports from Iran.

Meanwhile, Turkey’s state-owned lender Halkbank’s deputy general manager Mehmet Hakan Atilla, convicted in a New York court of participating in a money laundering scheme to help evade former sanctions on Iran, is currently serving a jail sentence in the US.

Atilla was found guilty of taking part in a plot led by Reza Zarrab, a wealthy Turkish-Iranian gold trader. Zarrab testified as the prosecutors’ star witness against Atilla. US authorities arrested Zarrab in 2016 while he was on a holiday trip to the US. After turning prosecution witness, he pleaded guilty to fraud, conspiracy and money laundering charges in return for his own lenient sentence.

It is feared that the US could still choose to impose substantial sanctions on Halkbank in the wake of the Atilla conviction.