Why is the Turkish Lira continuously weakening? 2025 Exchange Rate Trends and Investment Risk Analysis

Turkey Lira (TRY) as one of the most volatile emerging market currencies globally, has experienced a depreciation trajectory over the past decade that reflects deep-rooted economic and political issues. From the disastrous exchange rate of 165 million:1 against the US dollar during the high inflation period in 2001, to its current high-level oscillations, the story of the lira is not only a history of currency crises but also a warning for investors to exercise caution.

This article will delve into the fundamental reasons behind the lira’s depreciation, the exchange rate trends since early 2025, and strategies different investors should adopt.

Overview of Turkey Lira Fundamentals

The Turkish Lira (Turkish Lira, code TRY) is Turkey’s official legal tender, issued by the Central Bank of the Republic of Turkey. Its subunit is the kuruş, with 1 lira = 100 kuruş. Currently, banknotes are in denominations of 5, 10, 20, 50, 100, and 200 lira, while coins include 1, 5, 10, 25, 50 kuruş, and 1 lira.

The modern definition of the lira originates from a significant currency reform in 2005. To combat hyperinflation at the turn of the century, the Turkish government restructured the currency at a rate of 1 new lira = 1,000,000 old lira. In 2009, the currency name was adjusted again, and from 2010 onward, it was officially named “Turkish Lira,” with the old currency fully phased out. This history itself reveals the fundamental causes of the lira’s long-term exchange rate instability.

As an emerging market currency, the lira has relatively low liquidity in global financial markets, and its exchange rate volatility is deeply influenced by political environment, central bank policies, inflation levels, and geopolitical conflicts.

Exchange Rate Trends from Early 2025 to Present

Entering 2025, the Turkish lira has continued to perform weakly. At the start of the year, USD/TRY traded around 35–36, but amid internal political turmoil, rising inflation, and market doubts about policy credibility, the lira depreciated to around 42 per USD by mid-November, with a cumulative decline of over 20% for the year.

Of particular note is the market panic triggered by the detention of Istanbul’s mayor in March, which caused a rapid short-term depreciation of the lira, illustrating the market’s extreme sensitivity to political risks. Although the central bank has taken measures such as interest rate hikes to stabilize the exchange rate, structural issues like high inflation and long-term economic challenges have kept the lira oscillating in a depreciative range.

For Taiwanese investors, the lira is a typical “high volatility, high risk” currency. Without a thorough understanding of its economic and political background, it is advisable not to engage lightly.

Multi-layered Analysis of the Causes of Lira Depreciation

Policy Credibility Crisis

The core issue behind the persistent weakness of the Turkish lira lies in the severe disconnect between central bank policies and economic realities. Over recent years, the Turkish government has long pursued “unconventional monetary policies,” including cutting interest rates amid soaring prices, which has thoroughly destroyed market confidence in the independence of the central bank.

As a result, capital has accelerated outflows, and businesses and individuals prefer holding US dollars, euros, and other major international currencies, creating a self-reinforcing “vicious cycle”—people selling off lira leads to further depreciation, which fuels inflation, further undermining investor confidence.

Economic Structural Imbalance

Turkey’s economy is highly dependent on imports, especially for energy, raw materials, and industrial goods, most of which are settled in USD. Every time the lira depreciates, import costs rise, pushing up domestic prices and creating a triangular dilemma of import-inflation-depreciation. This structural flaw makes it difficult for the lira to escape long-term downward pressure.

Geopolitical Risks

In recent years, Turkey has faced increased political uncertainty, including risks from local elections, policy shifts, and tensions in the Middle East affecting its foreign policy. These factors lead international investors to adopt a more cautious stance toward Turkish assets, further weakening demand for the lira.

Structural Inflation Dilemma

High inflation is not only a consequence of depreciation but also a cause of it. When the central bank’s credibility is damaged and policy effects are questioned, enterprises and consumers expect inflation to remain high, leading to more aggressive pricing behaviors and further price increases. This creates an intractable cycle of inflationary expectations.

Key Currency Pair Trends and Forecasts

USD/TRY: Short-term Pressure and Mid-term Outlook

As of mid-November 2025, USD/TRY remains in the 9.8–10.0 range. After the Turkish central bank raised its year-end inflation forecast, the exchange rate slightly declined by 2.1% compared to October.

Short-term outlook: Expect continued oscillation between 10.0 and 10.5 over the next 1–3 months. The central bank may cut interest rates by 150 bps to 38.0% in December, adding short-term dollar rebound pressure. The 10.5 level remains a strong psychological support.

EUR/TRY: Fluctuations Narrowing with Euro Trends

In mid-November, EUR/TRY traded between 10.7 and 10.9. The medium- to long-term bullish trend of the euro provides some support for the lira.

Short-term forecast: May weaken slightly following EUR/USD corrections, testing resistance zones around 11.0–11.2. If the euro can hold above 1.1370 and resumes its upward trend, EUR/TRY is likely to stay below 11.0 with sideways movement.

TRY/TWD: Tourism and Exchange Rate Indicator

In mid-November, TRY/TWD was around 0.23–0.24 (i.e., 1 lira ≈ 0.235 TWD). The relative strength of the Taiwan dollar further amplifies the depreciation effect of the lira.

Investment suggestion: Before the Lunar New Year, as Taiwan travelers visit Turkey during peak season, exchange demand may temporarily increase. However, in the medium to long term, the trend still follows USD/TRY. Travelers are advised to adopt a phased exchange strategy to mitigate single-exchange risks.

Proper Ways to Invest in the Turkish Lira

Currency Exchange Channels and Recommendations

Bank Exchange: Banks such as Bank of Taiwan, Mega International, and Hua Nan can schedule to exchange for lira cash. Advantages include transparent fees and manageable risks; disadvantages are that physical cash takes 1–3 working days to prepare, and TRY is not a popular currency in Taiwan, so some branches may lack stock. Confirm availability by phone before exchanging.

Airport Exchange: Currency exchange counters at Taoyuan and Kaohsiung airports can be used for emergencies, but rates are much worse than banks, with higher fees. Avoid exchanging currency at Turkish airports, as the exchange loss is even greater.

On-site Usage Tips

Cash and Card Combo: Use cash for small expenses (food, transportation), and credit cards for larger purchases (shopping, accommodation).

Using Kuruş Coins: Coins can be used for bus fares, tips, or convenience store purchases. It’s recommended to accumulate coins during local transactions.

Price Level Reference: A cup of coffee costs 15–25 lira; local meals are 50–100 lira. Investors can adjust their budgets accordingly.

Pitfall Avoidance

Street Exchange Traps: Some street exchange points advertise “zero fees,” but the actual exchange rate may have hidden margins, often 10–20% worse than official rates.

Counterfeit Currency Prevention: When accepting cash, check the banknotes for integrity to avoid receiving damaged or suspicious bills.

Tipping Culture: About 10% tip is customary for dining and taxis. When paying in cash, round up to the nearest convenient amount.

Investment Value and Risk Warnings for the Lira

From the 2025 market environment, the Turkish lira remains a “high-risk currency.” Although the central bank is attempting to curb inflation through rate hikes and financial reforms, structural issues such as low policy credibility, high political uncertainty, and heavy import dependence continue to exert long-term depreciation pressure.

Suitable Investors

The TRY is more suitable for traders with experience in short-term forex trading, who can grasp event-driven opportunities and are willing to accept high volatility. The USD/TRY often fluctuates around 10% monthly, providing arbitrage opportunities for active traders.

Unsuitable Holding Methods

Avoid Long-term Holding: The long-term trend of the Turkish lira is clearly downward, with occasional rebounds. Profiting from lira appreciation is extremely difficult and risky, making it unsuitable as an asset allocation choice.

Gradual Entry to Reduce Risks: If optimistic about Turkey’s reform prospects, adopt a phased entry strategy. Use USD as principal, convert gradually into TRY, and combine technical rebounds for short-term trades. Avoid all-in or long-term holdings.

Common Ways to Trade the Turkish Lira

Bank Forex Accounts

Some Taiwanese banks offer foreign currency accounts, but TRY is not a common currency. Most banks do not directly buy/sell TRY. To “hold TRY physically,” you need to inquire with banks offering “special currency ordering” or open TRY accounts through overseas financial institutions (higher thresholds).

Advantages: low threshold, no leverage, relatively manageable risk; disadvantages: large spreads, low liquidity, difficulty profiting from appreciation.

Futures Trading

CME offers USD/TRY futures (symbol: USD/TRY 6M), with a standard contract nominal value of 100,000 TRY. However, trading volume is sparse, liquidity is limited, and most brokers do not open these to retail investors, so actual accessible investors are few.

CFD (Contracts for Difference)

CFDs are currently a more convenient way to trade TRY. By going long or short on USD/TRY and other currency pairs, traders can flexibly engage in two-way trading.

Advantages of CFD Trading:

• Easy online account opening, no need for offline counters, quick identity verification and deposit
• Relatively low entry barrier, suitable for small capital investors
• 24-hour two-way trading, can go long or short
• Minimum lot size as low as 0.01, leverage enhances capital efficiency
• Supports multiple TRY-related pairs (USD/TRY, EUR/TRY, TRY/JPY, etc.)

The margin trading feature allows investors to open positions with only a fraction of the total value, with risk managed via risk tools and leverage controls.

Key Dates and Risk Signals

December 15: Turkish Central Bank interest rate decision (short-term direction)

March 2026: Inflation data release (to verify policy effects)

Risk Warning: If the Istanbul Stock Exchange Bank Index drops more than 5%, it indicates accelerated foreign capital withdrawal, and the risk of rapid lira depreciation should be closely monitored.

Overall Investment Advice

Although the Turkish lira has a relatively low profile among general investors, its trend characteristics are distinct, and turning points are clear, offering certain trading opportunities. Investors should choose suitable products and strategies based on their risk tolerance and trading preferences, while closely monitoring macroeconomic and political developments to improve decision accuracy. Whether engaging in short-term arbitrage or holding for observation, disciplined risk management should always be prioritized.