## Turkish Lira Continues to Weaken: Underlying Economic Causes and Exchange Rate Truths

The Turkish Lira is one of the most volatile emerging market currencies globally. Over the past decade, this currency has experienced a long process of massive devaluation followed by prolonged weakness, forming a unique characteristic of "high interest rates, high volatility, high risk." Many investors are curious: why does the Lira continue to depreciate? How will the exchange rate develop in the future? Where are the investment opportunities in the Lira?

### Background of the Lira: From Crisis to Current Situation

The Turkish Lira (ISO code: TRY, symbol: ₺) is Turkey's official legal tender, with kuruş as subunits; 1 Lira equals 100 kuruş. Circulating banknotes include denominations of 5, 10, 20, 50, 100, 200 Lira, and coins of 1, 5, 10, 25, 50 kuruş, and 1 Lira.

The Lira once faced severe hyperinflation. At the end of 2001, the USD/TRY exchange rate worsened to approximately 1,650,000:1. To stabilize the monetary system, Turkey implemented major reforms in 2005, exchanging 1 new Lira for 100,000 old Lira, and in 2009, the currency name was adjusted, officially establishing the "Turkish Lira" after 2010, with old currency completely phased out. This history reflects the structural issues of long-term exchange rate pressure faced by the Lira.

### Core Drivers of the Lira’s Depreciation

The fundamental reason for the long-term weakness of the Lira is a malignant combination of **high inflation and lack of policy credibility**. In recent years, the Turkish government has implemented unconventional monetary policies, forcibly lowering interest rates amid soaring prices, leading to a loss of confidence in the central bank’s independence. Businesses and residents have shifted their holdings to strong currencies like USD and EUR, creating a vicious cycle of capital flight.

On the economic structural level, Turkey faces a **high dependence on imports**. Strategic commodities such as energy and raw materials must be paid for in USD. Every depreciation of the Lira increases import costs, further fueling inflation pressures, and market confidence in the Lira declines again. Additionally, **rising political uncertainty** is a significant factor. Variables like local elections, policy adjustments, and international relations fluctuations all prompt foreign investors to adopt a more cautious stance, making the Lira more susceptible to external shocks.

In short, the depreciation of the Lira is not a short-term phenomenon but the result of long-term accumulation of policy credibility issues, economic structural imbalances, and political risks.

### Real-time Performance of the Lira in 2025

Since the beginning of the year, the Turkish Lira has continued to weaken against the USD. The USD/TRY rate was around 35–36 at the start of the year. Due to political turmoil, high inflation, and doubts about policy credibility, the Lira has fallen to about 42:1 by mid-November, with a decline of over 20% for the year. Notably, the political incident in Istanbul in March triggered market panic, causing a short-term drop in the Lira’s exchange rate, fully reflecting market sensitivity to political risks.

Although the central bank has raised interest rates at times to stabilize the exchange rate, unresolved high inflation and structural issues mean the Lira remains in a high-level oscillating depreciation channel. For Taiwanese investors, the Lira is a high-volatility, high-risk asset, and should be evaluated only after understanding its economic background and risks; it is not suitable as a hedging asset.

### Investment Characteristics and Strategies of the Lira

**Short-term arbitrage opportunities exist**

The Lira exhibits significant USD volatility, often fluctuating by 10% or more within a single month. Investors experienced in forex short-term trading who can grasp event-driven opportunities may treat the Lira as a high-volatility trading instrument for technical operations.

**Not suitable for long-term appreciation holding**

The long-term trend of the Turkish Lira is one of continuous depreciation, with occasional rebounds but limited rebound magnitude. Strategies expecting to profit from Lira appreciation are highly challenging and carry substantial risks.

**Gradual deployment to diversify risk**

If investors are optimistic about Turkey’s reform prospects, they can adopt a phased approach—using USD to buy small amounts of Lira repeatedly, and engaging in short-term trading during technical rebounds. This avoids lump-sum investments or long-term asset allocation.

### Comparison of Three Major Forex Trading Channels

Investors can choose suitable tools based on risk tolerance and trading habits:

**Bank/Exchange Office Currency Exchange**

Some Taiwanese banks offer special currency ordering services, but the Turkish Lira is not common. Most branches do not hold cash in Lira; advance contact is needed to confirm availability. Advantages include no leverage and relatively controlled risk; disadvantages are large spreads, low liquidity, and difficulty profiting from appreciation.

**Futures Contracts**

The CME offers USD/TRY futures (symbol: 6M), with each contract representing 100,000 Lira. However, such currency futures are extremely niche, with low trading volume and liquidity, and most brokers do not offer retail access. The pool of actual tradable investors is very limited.

**CFD (Contracts for Difference)**

CFD is currently a more attractive option for investing in the Lira. It allows trading the USD/TRY currency pair with leverage. Advantages include low entry barriers, suitability for small capital, 24-hour two-way trading (buy or sell), minimum trade size of 0.01 lots, and multiple currency crosses (USD/TRY, EUR/TRY, TRY/JPY, etc.). Opening accounts online eliminates the need for in-person visits. The platform supports various Lira-related currency pairs. Margin trading allows leverage, suitable for small to medium investors, with risk management tools provided to keep leverage risks within reasonable limits.

### Practical Currency Exchange and Usage Guide

**Taiwan Currency Exchange Channels**

Bank exchange requires a 1-3 working day reservation for cash. Advantages include transparent fees; disadvantages are longer preparation time. Airport exchange can be used in emergencies but offers worse rates and higher fees, so not recommended regularly. Call ahead to confirm cash availability.

**Local Spending Tips in Turkey**

Use cash for small purchases, credit cards for large ones. Coins can be used for buses, tips, or small convenience store transactions. Price references: a cup of coffee costs about 15–25 Lira; local meals about 50–100 Lira. Tipping around 10% of the bill is customary.

**Avoid Common Traps**

Street exchange points marked "zero fee" may still have exchange rates 10–20% worse than banks; avoid these. When receiving cash, check for completeness and authenticity to prevent receiving damaged or counterfeit bills. When paying, round up to avoid small change and do not need to separately calculate tips.

### Short- and Medium-term Exchange Rate Forecasts

**USD/TRY: Short-term pressure, policy efforts expected**

Currently, the rate remains at high levels with fluctuations. In the next 1-3 months, it is likely to oscillate between 10.0 and 10.5, facing phased depreciation pressure, but there is strong psychological support around 10.5.

**TRY/EUR: Follow Euro’s major trend**

In the short term, it may weaken slightly with EUR corrections, testing higher resistance levels. If EUR stabilizes and resumes upward movement, this pair may maintain a lower-level oscillation.

**TRY/TWD: Linked to tourism demand**

In mid-November, around 0.23–0.24 (i.e., 1 Lira ≈ 0.235 TWD). Pre-Chinese New Year, Taiwanese travelers to Turkey may boost short-term gains, but medium- and long-term trends still follow USD/TRY movements. Travelers are advised to exchange in batches to avoid single large risks.

**Key Monitoring Points**

The central bank’s interest rate decisions will determine short-term exchange rate direction; subsequent inflation data will verify policy effects. If the local stock exchange and banking index fall more than 5%, it indicates accelerated foreign capital withdrawal, and the Lira may experience rapid depreciation.

### Summary

Although the Turkish Lira is not a focus for ordinary investors, its trend features are clear, and the factors influencing trend reversals are well-defined. It is a currency worth monitoring. Investors should choose suitable trading products and modes based on their risk tolerance and investment preferences, closely follow overall economic and political developments to improve trading judgment accuracy.