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USD/TRY forecast: Turkish lira under pressure from high inflation and low rates

By Nicole Willing

Edited by Valerie Medleva


Turkish lira on top of USA national currency, top view of mixed American dollars banknotes. TRY and USA paper money. Lira and US dollars exchange rate
Will the USD/TRY pair climb to new highs on lira weakness? – Photo: ViktoriyaFivko / Shutterstock

The Turkish lira (TRY) has fallen to fresh lows against the US dollar (USD), despite Turkish inflation falling below 40% in May, after reaching a 24-year high in October 2022.

Turkish President Recep Tayyip Erdogan had promised ahead of the elections that natural gas would be free of charge for all households in the month of May, and that a further 25 cubic metres (m3) of gas would be provided free of charge every month until May 2024. This would cost the Turkish government approximately TRY40bn ($1.92bn).

On 28 May, Erdogan was declared the winner of Turkey’s presidential election, having secured 52.14% of the vote. The following day the TRY reached a fresh all time low against the USD at 20.18.

As of 1 June, the USD/TRY exchange rate stood at 20.81, having fallen 11.37% year-to-date (YTD).

What drives the USD/TRY exchange rate and why has the pair soared to record highs?

In this article, we look at the pair’s recent performance and the latest USD/TRY forecasts from foreign exchange (forex; FX) analysts.

What drives the USD/TRY exchange rate?

In forex trading, the USD/TRY refers to how many Turkish lira – the quote currency – are needed to buy one US dollar – the base currency. The rate was just 1.19 in July 2008, but has soared to more than 18 in the current macroeconomic environment.

USD/TRY 5-year chart

The US dollar is the world’s reserve currency. Its value is driven by the health of the global economy as much as the US economy. Investors view the dollar – which is also known as the greenback because of the colour of its notes – as a safe haven financial asset to protect their wealth during times of economic and geopolitical uncertainty. 

In 2022, the US Dollar Index (DXY) – which measures the value of the dollar against a basket of other major currencies – has soared to fresh 20-year highs. 

In addition to volatility created by the Russia-Ukraine conflict, the US Federal Reserve’s (Fed) moves to aggressively raise interest rates at the fastest pace in decades to tackle soaring inflation has been a key driver. Higher interest rates increase demand for a currency from foreign investors looking for higher returns from fixed-income and other assets.

The Turkish lira is the official currency of Turkey and North Cyprus. The value of the lira was pegged to the US dollar at a rate of 2.8 from 1946 until 1960, when it was devalued to 9. From 1970, the currency was regularly devalued until it reached 1.35 million to one dollar in 2005. The lira was ranked as the world’s weakest currency in 1995-1996 and 1999-2004 by the Guinness Book of Records. It was then redenominated as a new currency in 2005, removing six zeros from the exchange rate.

USD/TRY soars on Turkish economic policy

The record high USD/TRY exchange has its roots in the 2018 currency crisis, prompted by Turkish President Tayyip Erdogan's unorthodox economic policies, including cutting interest rates in the face of rising inflation. 

The USD/TRY pair climbed from 3.7691 at the start of 2018 to 5.3172 a year later, and by the start of 2021 was trading at 7.3237. The pair retreated slightly in February 2021 as the central bank adjusted reserve requirements, but the lira crashed again in March and USD/TRY resumed its climb as Erdogan fired central bank chief Naci Ağbal after four months on the job.

Inflation in Turkey climbed to almost 21% during 2021. The currency fell in December when the central bank cut the key interest rate to 14% from 15%. The USD/TRY pair climbed to a new record high of 15.50 in response and ended the year around 13.50, almost doubling in value from the start of 2021.

The rate has climbed higher in 2022, accelerating to fresh lows after the central bank cut interest rates unexpectedly in August and inflation data showed price increases soaring above 80%.

The Turkish central bank reduced the policy rate from 14% to 13% on 18 August, citing rising tourism revenues and expectations that inflation will begin to moderate. The bank stated:

“Additionally, leading indicators for the third quarter point to some loss of momentum in economic activity. It is important that financial conditions remain supportive to preserve the growth momentum in industrial production and the positive trend in employment in a period of increasing uncertainties regarding global growth as well as escalating geopolitical risk.”

Turkey’s depleted foreign currency reserves almost tripled from early July to $15.68bn in early August, in part from a return to tourism near pre-pandemic levels. 


0.66 Price
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Long position overnight fee -0.0071%
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Overnight fee time 22:00 (UTC)
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Overnight fee time 22:00 (UTC)
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But inflation climbed to 79.6% in July from 78.62% in June and 18.95% in July 2021. There were no indications that the rate cut was coming and forex traders sold the lira, bringing the USD/TRY pair above the 18 mark for the first time.

On 5 September, the Turkish Statistical Institute released data that showed the country’s consumer price index surging to 80.21%, placing it at the top of TradingEconomics’s list of the G20 countries with the highest inflation rates.

Top 10 G20 countries with the highest inflation rates

Ratings agency Fitch downgraded Turkey’s Long-Term Foreign-Currency Issuer Default Rating (IDR) on 8 July to 'B' from 'B+' with a negative outlook, in part because of persistent high inflation. 

“We forecast annual inflation to average 71.4% in 2022, the highest of Fitch-rated sovereigns and its trajectory remains highly uncertain due to increased risks of backward indexation, rising expectations and additional lira depreciation, as the exchange rate pass-through has increased in both speed and magnitude. Inflation will average 57% in 2023, as we expect the overall policy mix to remain overly accommodative at least until the 2023 elections,” the agency’s analysts wrote. 

“The government's focus on maintaining high growth feeds FX demand, depreciation pressures on the lira, decline in international reserves and spiralling inflation, and discourages capital inflows to fund the higher current account deficit.”

What is the outlook for the USD/TRY given the expectations for inflation to remain high and the government resistant to interest rate hikes, unlike other central banks around the world?

USD/TRY forecast: Will the pair climb to fresh highs?

Foreign currency analysts tend to view the USD/TRY rate as continuing to rise over the coming year with the lira remaining under pressure from Turkish monetary policy.

“We expect inflation to peak in the 85-90% range in October, before a decline to around 70% at year-end, while risks are on the upside given deterioration in pricing behaviour, impact of exchange rate developments and higher trend inflation. Currency moves will remain key for the inflation outlook,” wrote Muhammet Mercan, analyst at Dutch bank ING, in a recent report. 

“The global risk model and inflation expectations locally in an environment of negative real rates will determine TRY moves.”

ING’s USD/TRY forecast shows the pair trading up to the 20 level by the end of the year and reaching 24 by the end of 2023. The bank’s forecast for the end of 2024 shows the pair trading at 27.50, indicating a bullish USD/TRY forecast for 2025.

At the time of writing (12 September), the USD/TRY prediction from Trading Economics indicated that the pair could trade up to 22.66 in a year, from 19.2571 by the end of the third quarter, based on global macro model projections and analysts’ expectations. 

The USD/TRY forecast from Danske Bank similarly predicted the pair rising from 18.00 at the end of the third quarter to 23.00 at the end of the second quarter of 2023.

The American dollar to Turkish lira forecast from SEB Group expected a somewhat slower rise towards the 23 level, with the pair rising from 18.50 at the end of the quarter to 20.00 by the end of the first quarter and 22.50 in a year’s time.

USD/TRY predictions

However, analysts at Monex expected the pair to stabilise, with the UK foreign currency firm’s USD/TRY forecast for 2022 rising from 18.00 at the end of the third quarter to 18.50 at the end of the year, and then holding at that level to the end of the first quarter of 2023. Monex predicted that the lira could then strengthen slightly, moving the pair back to 17.50. Analysts have yet to issue a USD/TRY forecast for 2030.

If you are looking for an American dollar to Turkish lira forecast, it’s important to remember that currency markets are highly volatile, making it difficult for analysts to come up with accurate long-term predictions. 

We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.


Why has USD/TRY been rising?

The US dollar has climbed to record highs against the Turkish lira as the Turkish central bank has adopted a policy of cutting interest rates despite soaring inflation, while the US dollar is trading at 20-year highs on high interest rates, economic uncertainty and geopolitical instability.

Will USD/TRY go up or down?

The direction of the USD/TRY pair could depend on Turkish monetary policy as well as the strength of the US dollar, among other factors.

When is the best time to trade USD/TRY?

You can trade USD/TRY around the clock on weekdays. The busiest time for the market is often around the release of major economic announcements, such as trade data, inflation and interest rates, which tend to drive volatility on currency markets, increasing liquidity and creating opportunities for traders to profit. However, you should keep in mind that high volatility increases risks of losses.

Is USD/TRY a buy or sell?

How you trade the USD/TRY pair is a personal decision depending on your risk tolerance and investing strategy. You should do your own research to take an informed view of the market.

Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.

Markets in this article

US Dollar Index
102.518 USD
0.047 +0.050%
28.95323 USD
0.14595 +0.510%

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