Turkish Lira Holds Devaluation Pace

The Turkish lira weakened to a record low of 48.5 per USD in September, maintaining the controlled and slow devaluation rate by the Central Bank of Turkey as it intervenes in foreign exchange markets to prevent a slide. The TCMB held its key policy rate unchanged for the fifth straight decision in September, as expected. The central bank flagged that leading indicators pointed to a deceleration in underlying inflation in recent months, balanced by higher inflationary risks triggered by escalation in the Middle East war. The central bank had continued to sell liras in the open market to maintain the steady pace of devaluation. Support for the currency was also seen with policymakers downplaying an imminent return to one-week repo auctions, which has been suspended since March, forcing financial institutions to use the more expensive overnight rate.

USDTRY increased to an all-time high of 48.37. Over the past 4 weeks, US Dollar Turkish Lira gained 1.67%, and in the last 12 months, it increased 17.47%.

The Turkish lira weakened past 48 per US dollar in August, extending its gradual depreciation to a fresh record low and bringing year-to-date losses to about 17%. The currency has followed a gradual depreciation path as the Central Bank of Türkiye uses foreign-exchange interventions and other FX tools to contain excessive volatility and limit exchange-rate pass-through to inflation, allowing the lira to weaken while supporting the disinflation process. Annual consumer inflation eased to 31.75% in July from 32.11% in June, although the CBRT noted that leading indicators pointed to a temporary pickup in underlying inflation in July, keeping price pressures elevated. The CBRT also raised its end-2026 inflation forecast to 28% from 26% amid higher energy and food-price pressures. Meanwhile, the bank held its benchmark overnight lending rate at 37% for a fourth consecutive decision in July, maintaining its tight monetary policy stance.