The Turkish lira (TRY)

What it is

The Turkish lira (ISO code: TRY) is the official currency of Türkiye, issued and managed by the Central Bank of the Republic of Türkiye (TCMB, from its Turkish acronym). A single lira divides into 100 kuruş. The TCMB's primary instrument is the one-week repo auction rate, which it adjusts at scheduled Monetary Policy Committee meetings, eight of which are planned for 2026. The lira is a freely floating currency in principle, though the TCMB has intervened repeatedly in foreign exchange markets, and Türkiye's government has used regulatory measures, including the Kur Korumalı Mevduat (KKM) foreign-exchange-protected deposit scheme, to limit dollarization of household savings. The TCMB holds official foreign exchange reserves, though the net reserve position (after subtracting FX swap obligations) has at times been negative, making the lira sensitive to capital flows and current-account dynamics.

History

Severe inflation through the 1970s-1990s steadily eroded the lira, and by 2005 one US dollar bought roughly 1.35 million old lira. In January 2005, Türkiye redenominated, replacing 1 million old lira with 1 new Turkish lira (removing six zeros); the TRY symbol replaced the interim YTL in 2009. A major turning point came in 2001, when Türkiye abandoned a crawling-peg anchor during a banking crisis, negotiated a US$19 billion IMF programme, and implemented structural reforms. The next acute crisis arrived in 2021. President Recep Tayyip Erdoğan argued publicly that high interest rates cause inflation rather than curb it, presiding over successive changes in TCMB leadership and aggressive rate cuts late in the year. The lira lost roughly 44% of its value against the US dollar in 2021 alone. Türkiye responded by launching the KKM scheme, compensating depositors for FX losses and transferring the liability onto the public balance sheet, with estimated contingent obligations of US$50-70 billion. After Erdoğan's re-election in May 2023, Türkiye reversed course: Finance Minister Mehmet Şimşek and a new TCMB leadership launched an orthodox tightening cycle, lifting the policy rate from 8.5% in May 2023 to 50% by March 2024.

Current state

As of early July 2026, the TCMB has entered a cautious easing phase. The one-week repo rate stood at 37% in January 2026, down from a peak of 50% in early 2024, after 250 basis points of cuts through December 2025 and January 2026. The overnight lending rate was 49% in April 2025, then cut progressively in line with the repo rate. The TCMB targets annual consumer inflation of 16% by end-2026, 9% by end-2027, and 5% over the medium term. Inflation peaked above 75% in mid-2024 and decelerated through 2025, though structural price pressures in food, energy, and services remain. Turkish lira-denominated deposits account for roughly 59% of total bank deposits, near historical averages; the KKM wind-down is a key variable for this share. The US dollar/TRY rate is projected by the TCMB to reach approximately 51 by end-2026, implying continued gradual nominal depreciation.

Relationships

The lira's trajectory is inseparable from Türkiye's domestic politics. Erdoğan's repeated public pressure on the TCMB to cut rates regardless of inflation, documented across multiple governance cycles, made the lira a lightning rod for political risk pricing among emerging-market investors. The trials surrounding Istanbul mayor Ekrem İmamoğlu (see 伊马姆奥卢「政治间谍」案在锡利夫里开庭审理) and the European Union's escalating criticism of Türkiye's rule-of-law record (see 欧洲议会通过年度报告，呼吁对土耳其司法部长实施制裁) add a geopolitical dimension: capital flows to Türkiye incorporate a premium for political instability. The KKM scheme transferred currency risk from depositors to the Treasury, tying fiscal and monetary dynamics closely. Externally, Türkiye's current-account deficit, energy-import dependency, and large short-term external debt obligations make the lira sensitive to oil prices, US dollar strength, and Federal Reserve policy.

What to watch

The central question for the lira in 2026 is whether the TCMB can continue cutting rates toward the 25% range projected by some analysts without reigniting inflation or triggering capital outflows. Key indicators include: monthly CPI releases from TÜİK (Türkiye's statistics agency), TCMB net foreign exchange reserve data, the pace of KKM conversion back to unprotected lira deposits, and current-account data from the TCMB. Any resumption of political pressure on TCMB independence, fresh geopolitical friction, or a sharp rise in global energy prices would likely accelerate lira depreciation ahead of the TCMB's own projections.