The USD to TRY exchange rate has been in a bull run for decades, soaring from just 1.1 in 2008 to over 30 today. With Turkey's Central Bank to keep its key rate at 50% until at least November, what are the latest Turkish Lira forecast and price predictions for 2024 and beyond?
As Turkey faces one of the worst cost-of-living crises in its history, the Central Bank raised borrowing costs from 8.5% to 50% in an aggressive run of hikes between June and March as part of President Recep Tayyip Erdogan’s return to orthodox economic policies. The Turkish central bank left the key rate unchanged at 50% for four months and it may remain at the current level until the end of the year, according to the latest Turkish Lira forecasts from Bank of America, Citibank and Morgan Stanley. A steady decline in inflation will be a prerequisite for its reduction, said the bank's deputy chairman Osman Akcay. Annual inflation in Türkiye fell sharply in a month, by almost 10 percentage points, to 61.78% at the end of July. However, despite the sharp decline in the July indicator, the core monthly inflation remains above the forecasts of the Central Bank of Türkiye, which is due to the continued growth of prices in the service sector. With the Turkey Central Bank forecasting inflation to end 2024 at 43.9% and the end of the aggressive tightening cycle, where do banks and analysts forecast the Turkish Lira will move in 2024 and beyond? With CAPEX.com you can trade CFDs onUSD/TRY, EUR/TRY and GBP/TRY with low spreads and 1:10 leverage. High-interest rate currencies like the Turkish lira are very attractive to those who are aiming for swap points in forex trading. However, for beginners, trading for Turkish lira swap points carries a great deal of risk. Follow the USD/TRY, EUR/TRY, and GBP/TRY price charts for live data, and read our latest Turkish Lira forecast and price predictions for 2023 and beyond. Key pivot points and support and resistance levels provide further insights to help you make informed trading decisions. Officials from the Turkish Central Bank have recently made statements to guide expectations on inflation and the rate-cutting cycle. The CBT will likely remain on hold for longer, while the timing will be determined by underlying inflationary trends and the alignment of inflation expectations. Governor Fatih Karahan restated the recommendation for a shift in the monetary policy stance, based on the development of inflation expectations and the underlying inflationary trend. Conversely, Deputy Governor Akcay said that although central banks generally err on the side of caution, what a central bank is concerned about varies depending on the circ*mstance. He said that there might be the possibility of an early interest rate cut triggering a resurgence of pricing pressures or a scenario where an overly aggressive or needlessly drawn-out tightening process results in a harsh landing. He believes that a rate cut is not currently in the cards because the first case is more risky given the current circ*mstances. Despite pressure on food prices, administrative price adjustments, special consumption tax, and official price adjustments, annual inflation has maintained its downward trend and accelerated relative to July with a favourable base. It seems probable that the downward trend will persist, with a further sharp decline in August. Administrative price adjustments will determine the magnitude of the fall, as demonstrated by the 38% increase in natural prices at the beginning of this month. These adjustments are likely to have a direct and indirect impact of less than 1ppt on the headline. The Turkish lira's sustained real appreciation and the delayed effects of monetary tightening on credit and domestic demand are probably going to keep the underlying inflation trend negative for the rest of the year. The economy is likely to see a significant slowdown in 3Q due to tight financial circ*mstances, but the timing of the cutting cycle may also be influenced by a deeper-than-expected effect.Turkish Lira Forecast &Price Prediction – Summary
Fundamental Turkish Lira Forecast 2024 - Monetary policy under focus
Interest rates on hold
Big drop in annual inflation
Sharp drop in annual current account deficit
Overall, a boost in May in terms of foreign commerce can be seen, however this could be temporary after relatively flat 12-month total exports in the first four months. On the other hand, 12-month imports, which have been progressively decreasing and helping to improve the current account deficit, will keep lowering since the external outlook is likely to be supported by the way CBT activities affect the balancing of demand components.
In the capital account, participation was comparatively modest throughout the first four months; however, data from May indicates that inflows have resumed, with foreign investors demonstrating a growing desire for Turkish assets. CBT reserves will continue to benefit soon from the extremely low current account deficit through October, the potential for a current account surplus in several months, and the maintenance of the strict monetary policy encouraging foreign flows.
Turkish economy outlook and forecast
The local elections in March 2024 marked a further step in the in the strategy started in 2023 (implementation of more orthodox policies to end a period characterized by negative real interest rates) with a tightening of financial conditions to stabilize the economy, reduce runaway inflation and strengthen the country's macroeconomic foundations.
Can Turkish exports benefit from the sharp depreciation of the lira?
Turkey introduced the Turkish Economic Program (TEP) in the middle of 2021 to boost exports, employment, investment, and manufacturing. The central bank lowered its key rate from 19% to 8.5% between September 2021 and May 2023 to accomplish these goals. The outcome was an almost 60% decline in the value of the Turkish lira relative to the US dollar during this time, and an increase in inflation from 19.3% in August 2021 to 85.5% in October 2022.
The lira's devaluation has not had the intended impact on the current account, despite the TEP's original goals. In nominal terms, Turkish exports increased by 13.4% between 2021 and 2023 while imports increased by 33%. As a result, the trade deficit widened to $106 billion (9.5% of GDP) in 2023, $60 billion higher than in 2021 ($46 billion, 6% of GDP).
Impact of negative real interest rates on companies
Turkish businesses were able to take use of low-cost loans during the time of negative real interest rates, which encouraged their operations despite the country's high inflation rate. Because they can pass on costs to customers and enjoy higher margins, companies with strong pricing and production capitalisation have benefited most from this scenario.
Although labour expenses increased by 270% per unit between 2021 and 2023 due to an explosion in production, businesses were nevertheless able to remain profitable because of the extremely low borrowing rate environment.
The consequences of a more orthodox economic policy
The Turkish Central Bank's key interest rate increased from 8.5% to 50% in June 2023, while interest rates on commercial loans also increased to 70% in tandem with the implementation of more conventional economic policies. The objectives are to control inflation, lessen the increase in domestic demand, and keep the lira stable.
In the medium run, this turnaround ought to aid in the rebalancing of the economy. Real GDP growth of 3% is anticipated in 2024, along with a gradual decline in inflation to 43% by the end of the year, according to forecasts. The economy should continue to see greater stability as the current account deficit, which decreased by $14 billions between the first quarters of 2023 and 2024, continues to decline.
Turkish businesses have bright prospects for steady and sustainable long-term economic growth if they can adjust to these changes (new financial circ*mstances, a rebound in external demand, regional cooperation initiatives like "The Middle Corridor" project, which aims to link Europe and Asia via the Caucasus and the Caspian Sea).
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Turkish Banking Sector Outlook and Forecast
Fitch Ratings has revised its Turkish banking sector outlook to ‘improving’ from ‘neutral’ on reduced external financing pressures and macro and financial stability risks following Turkiye’s adoption of more conventional macroeconomic policies after last year’s presidential election.
A reduction in dollarization, an increase in the Central Bank of the Republic of Turkiye's (CBRT) foreign currency (FX) reserves position, and improved bank access to external funding have all resulted from growing investor trust in the country's policy framework. Consequently, a sizeable amount of the industry's foreign-currency (FC) liquid assets—banks' FX swaps with the CBRT—have decreased dramatically. All these elements should keep promoting financial stability and improve the Turkish Lira forecasts for the remaining of 2024 and 2025.
Analysts expect the unwinding of the FX-protected deposits scheme to continue, driven by lower domestic FC demand amid improved exchange rate stability expectations, but to remain gradual given the potential adverse impact on exchange-rate stability and foreign exchange reserves if FC demand rises sharply. They believe regulatory limits on FX swaps with foreign counterparties could also be relaxed amid the decline in the CBRT’s FX swaps with domestic banks.
However, there is still much doubt over Turkiye's present policy combination's ability to produce a long-term drop in inflation. Investor confidence may decline if policy consistency is not improved—for instance, by adopting stricter income and fiscal policies or delaying monetary easing. Furthermore, the sector's high, albeit declining, FC and FX-protected deposit levels (which account for 52% of total deposits) and heavy reliance on outside funding pose dangers to sector FC liquidity.
Turkish Lira Forecast - Technical Outlook
The Turkish Lira fell against its main counterparts at the start of August, recording a new record low against the US dollar and Euro. Recently, the USD/TRY broke the 33.30 levels while the EUR/TRY the 36.30 levels as the lira traded at its lowest level ever against the most liquid currencies in the forex market, following the country's inflation data.
US Dollar to Turkish Lira Forecast
The USD/TRY exchange rate rose, with the pair reaching new highs on August 5 at 33.66. Technically, the price broke through the upper boundary of the rising wedge pattern on the daily timeframe, as illustrated in the chart. Also, the pair traded above the 50 and 200 moving averages on both the daily and four-hour timeframes, with the overall upward trend resuming control of the pair.
If the pair continues to rise, it targets resistance levels at 33.70 and 34.00 lira, respectively. Conversely, if the pair declines, it targets support levels at 33.25 and 33.10 lira, respectively. The Turkish lira price forecast suggests a rise in the pair, especially after testing the upper boundary of the wedge pattern which became a support now.
Euro to Turkish Lira Forecast
The EUR/TRY exchange rate rose, with the pair reaching new highs on August 5 at 36.80. Technically, the price broke through the upper boundary of the rising wedge pattern on the daily timeframe, as illustrated in the chart. Also, the pair traded above the 50 and 200 moving averages on both the daily and four-hour timeframes, with the overall upward trend resuming control of the pair.
If the pair continues to rise, it targets resistance levels at 36.80 and 37.00 lira, respectively. Conversely, if the pair declines, it targets support levels at 36.30 and 35.60 lira, respectively. The Turkish lira price forecast suggests a rise in the pair, especially after testing the upper boundary of the wedge pattern which became a support now.
Pound to Turkish Lira Forecast
Unlike USD/TRY and EUR/TRY exchange rates, GBP/TRY was not able to reach new highs on August 5 at 36.80. Technically, the price broke through the upper boundary of the rising wedge pattern on the daily timeframe, as illustrated in the chart. Also, the pair traded above the 50 and 200 moving averages on both the daily and four-hour timeframes, with the overall upward trend resuming control of the pair.
If the pair continues to rise, it targets resistance levels at 43.20. Conversely, if the pair declines, it targets support levels at 42.000 lira. The Turkish lira price forecast suggests a rise in the pair, especially after testing the upper boundary of the wedge pattern which became a support now.
Turkish Lira Forecast: Can TRY stabilize or it will decline further?
Analysts forecast Turkish Lira will weaken by about one-third versus the dollar in 2024 to hit new all-time lows, as a sharp increase in interest rates does little to tame domestic inflation or convince Turks to hold the ailing lira.
Bearish Turkish Lira Forecast from S&P Global
Considering the stronger-than-anticipated performance of domestic demand, S&P Global has updated its growth projections for the Turkish economy in 2023 and 2024. The group upgraded its growth projections for Turkey from 2.3% to 2.4% in 2024 and from 3.5% to 3.7% in 2023. The growth estimate was changed from 2.9% to 2.7% for 2025 and from 3.1% to 3.0% for 2026.
According to the assessment, Turkey's average inflation rate is expected to be 53.7% this year and 50.3% the following year, with estimates for 2025 and 2026 of 29.1% and 18.0%, respectively.
S&P forecasts the Turkish Lira to trade at 40.0 against the USD at the end of 2024, 42.0 at the end of 2025, and 43.0 at the end of 2026.
Bullish Turkish Lira Forecast from JP Morgan
Investment bank JPMorgan backed a bounce in Turkey's lira as one of its key emerging market bets for 2024.
"The first theme (of 2024) is recovery trades," JPMorgan said highlighting Turkey alongside Poland, South Africa, and Israel.
"We add short 6-month USDTRY forward to our existing overweight on TRY," it added, referring to a bet for Turkey's lira to rise against the dollar.
Bearish Turkish Lira Forecast from Commerzbank
Economists at Commerzbank retain their US Dollar to Turkish Lira forecast of 35.00 by the end of 2024.
According to Commerzbank, the Turkish Lira has stabilized to some degree after the newly appointed economy management team continued to implement tough monetary tightening and financial sector reforms. Still, it will take much longer for inflation to return fully to target, hence the market remains uncertain about President Tayyip Erdogan’s support.
Bearish Turkish Lira Forecast from ING
ING forecasted the Turkish Lira to weakness in 2024, but not as much as priced in by the forwards. The Dutch Bank forecasted the Turkish Lira to trade at 33.00 TRY per USD in the first quarter of 2024 and decline up to 38.00 by the end of the year.
This bearish Turkish Lira price prediction is based on a high budget deficit target despite disinflation efforts: "The fiscal stance is likely to remain accommodative in 2024 with another wide deficit at 6.4% of GDP, though excluding earthquake-related spending, the target is below the 3% threshold. Given this backdrop, the fiscal outlook for next year is not fully helping the CBT in the disinflation process."
Turkish Lira Price Predictions from AI-based Websites
Trading Economics was also bearish in its Turkish lira projections as of the beginning of 2024, forecasting that the USD/TRY rate could move above 36.00 at the end of this quarter to 34.47 in a year’s time.
In its Turkish lira forecast for 2024, algorithm-based forecast website WalletInvestor saw the USD/TRY currency pair trading as high as 36.00 by the end of the year. The agency forecast the Turkish Lira in 2024 will follow a steady uptrend and decline 20%. In its 5-year Turkish Lira price prediction, the USD/TRY is seen at 62.00.
Gov Capital forecasts the Turkish Lira to trade as high as 40.00 TRY per USD this year. On a 5-year Turkish Lira price prediction, the agency is forecasting USD/TRY to trade between 95.00 and 100.00.
Panda Forecast sees the Turkish Lira trading at 28 TRY per Dollar at the end of the year. This is one of the few bullish Turkish Lira forecasts for 2024.
Based on historical data, the platform issued a longer-term prediction than most banks–its Turkish lira forecast for 2025 predicted that USD/TRY would trade at an average of30.727 by the end of that year.
Euro - Turkish LiraForecast
Like its USD/TRY forecast, TradingEconomics forecasts Euro Turkish Lira to be priced at 36.84 by the end of this quarter and at 33.70 in one year, according to Trading Economics' global macro model's projections and analysts expectations.
Pound - Turkish LiraForecast
Additionally, TradingEconomics forecast a pound-to-lira rate of 42.76 by the end of this quarter and 42.97 in 12 months.
Due to market volatility, no bank or algorithm-based forecast websiteissueda pound-to-lira forecast for 2030.
Note:
When looking for Turkish lira future predictions, it’s important to bear in mind that analysts’ forecasts can be wrong. Analysts’ expectations are based on making a fundamental and technical study of the currency pair’sperformance. However, past performance is not a guarantee of future results.
Do your own research and always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. Never trade more money than you can afford to lose.
Trading the Turkish Lira
A popular way to trade Turkish Lira on the foreign exchange market is through CFDs.
A forex CFD is a contract in which you agree to exchange the difference in the price of a currency pair from when you open your position to when you close it. Open a long position, and if the forex position increases in price, you’ll make a profit. If it drops in price, you’ll make a loss. Open a short position, and the opposite is true.
Forex is just one of the markets you can trade using CFDs. Learn more about CFD trading.
Our trading platforms can provide you with a smart and fast way to trade forex. You can trade via the CAPEX.com platforms in:
- Your web browser
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Each of our forex trading platforms can be personalized to suit your trading style and preferences, with personalized alerts, interactive charts, and risk management tools.
Trading a USD/TRY CFD
Each contract is equal to 100,000 of the base currency of the pair. In this case, selling a single USD/TRY standard contract is equivalent to trading 100,000 USD for 18,597,200 TRY so your total position is worth 92,986,000 TRY(500,000 USD).
CFDs are a leveraged product, so you don’t have to put down the full value of your position upfront. A deal of this size on USD/TRY has a margin requirement of 10%, so your margin would be 5% of the total exposure of your trade, which is 25,000 USD.
If your prediction is correct
The Turkish Lira falls as you predicted. You decide to close your position when the Sell price reaches 20.0000.
To calculate your profit, you multiply the difference between the closing price and the opening price of your position by its size. 20.0000 –18.5972= 1.4028 or 14,028 pips, which you multiply by 0.5 CFDs and pip value (0.53 USD) to get a profit of3712.6914USD (minus any overnight charges).
If your prediction is wrong
Turkish Lira rises instead. You decide to cut your losses and reverse your trade when the sell price is 18.0000.
Your position has moved 5,972 pips against you, meaning you make a loss of1,591.8175(in addition to any overnight charges).
Pip value is calculated using the following formula: Pip / Market Price x Lot x Contract Size. Learn more about forex pip calculation.
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Sources:
- 2024Monetarypolicy.pdf (tcmb.gov.tr)
- Turkish Lira - Quote - Chart - Historical Data - News (tradingeconomics.com)
- Turkish central bank likely to end hiking cycle next month | Snap | INGThink
- JPMorgan backs Turkey's lira as key 2024 bet | Nasdaq
- Turkey Stocks, Lira (TRY/USD) Investor Outlook: 2024 Is All About Winning Trust - Bloomberg
FAQs on Turkish Lira Forecast
This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest.The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided.
