Turkey’s lira sank to yet another record low on Monday as Turkish President Recep Tayyip Erdogan called on Turks to boycott of French goods, adding to a mounting list of geopolitical spats increasing investor concerns.

Erdogan said Macron has a problem with Muslims and needed mental checks – a rebuke that caused France to recall its ambassador from Ankara.

The latest Turkey-France rift was sparked by last week’s gruesome murder of 47-year-old teacher Samuel Paty who was beheaded near his school in a Paris suburb after showing cartoons of the Prophet Muhammad in a class on freedom of expression.  Muslims believe any depiction of the prophet is blasphemous.

Earlier this month, Macron had described Islam as a religion “in crisis”.

Rising tensions with France add to a mounting list of geopolitical concerns weighing on the lira, including strained relations between Ankara and Washington, a dispute between Turkey and Greece over maritime rights .
The lira weakened more than 1 percent to as far as 8.0670 from a close of 7.9650 on Friday and was the worst performer among emerging market peers. It has lost 26 percent of its value this year and more than halved in value since the close of 2017.

“The rising geopolitical tensions with the USA and EU are new sources of pressure weakening the lira. The other main elements are the questioning of monetary policy credibility and the adequacy of the lira yield,” said a local bank forex trader.

The central bank left its key rate at 10.25 percent on Thursday and raised its late liquidity window to 14.75 percent, saying significant tightening in financial conditions had already been achieved after steps to contain inflation risks.

It had been expected to raise its policy rate by 1.75 percentage points in the face of lira weakness triggered by concerns about inflation and the central bank’s badly depleted foreign exchange reserves.

Market attention is now turning to Turkish Finance Minister Berat Albayrak’s participation in Citibank talks with investors on Tuesday and the central bank’s quarterly inflation report on Wednesday.

The lira also hit a record low beyond 9.5 against the euro. Turkey’s dollar-denominated government bonds fell as much as 1.4 cents. The main Istanbul share index dropped 1.2 percent.

President Erdogan confirmed on Friday Turkey had tested Russian S-400 air defence systems, which Washington says compromise NATO defences. It has threatened sanctions and last week’s test prompted a furious response from the Pentagon and the State Department.

But Erdogan struck a defiant tone on the issue of sanctions on Sunday, saying in a speech: “You don’t know who you are dancing with. Whatever the sanctions are don’t be late. Do it.”

Separately, Turkey extended the seismic survey of a ship in a disputed area of the eastern Mediterranean until November 4 – a move Greece condemned on Sunday as “illegal”, reviving tensions between the NATO members.