Turkish Lira Holds at Record Lows

The Turkish lira traded near 50 per US dollar in November 2026, hitting a fresh record low as authorities maintained a controlled pace of depreciation while intervening in foreign exchange markets to prevent a sharper decline. The currency remains vulnerable to carry-trade positioning, whereby investors borrow in lower-yielding currencies to invest in Turkish assets offering higher returns. At its October meeting, the Central Bank of the Republic of Türkiye cut its benchmark interest rate by 100 basis points to 36%, as expected, marking its first rate reduction since the war with Iran began. However, inflation unexpectedly edged up to 29.77% in October. Despite the slight acceleration in inflation, analysts believe the latest reading is unlikely to alter the central bank's monetary easing path. Many continue to expect another 100bps rate cut this year.

The Turkish lira approached 50 per US dollar in October 2026, hitting a fresh record low as authorities maintained a controlled pace of depreciation while intervening in foreign exchange markets to prevent a sharper decline. The lira remains exposed to carry-trade positioning, with investors borrowing in lower-yielding currencies to invest in Turkish assets offering higher returns. At its October meeting, the Central Bank of Turkey cut its benchmark interest rate by 100 basis points to 36%, as expected, marking its first rate cut since the war with Iran began. The decision followed a further easing in inflation, which slowed to 29.73% in September, its lowest level in nearly five years.. The easing cycle is expected to continue into 2027, with the policy rate forecast to fall to 28% by year-end. Meanwhile, the investment fund sector is facing a crisis after regulators ordered the liquidation of 131 funds.

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.