The Turkish lira sank to a record low after President Recep Tayyip Erdogan secured his victory in the 2023 presidential election, extending his rule into its third decade in power. With Erdogan endorsing the unconventional view that raising interest rates increases inflation, what is the latest Turkish Lira forecast for 2023 and beyond?
Turkish Lira weakened to over 20 to the dollar in early European trade, as the pair recorded record levels that surpassed the peak recorded earlier in May, where the pair touched levels of 19.58.
The lira has slumped around 7% since the start of the year, and lost more than 90% of its value over the past decade, with the economy in the grip of boom-and-bust cycles and rampant bouts of inflation.
The nation’s dollar bonds slipped to their lowest in at least six months, while the cost of insuring exposure to Turkey’s debt via credit default swaps (CDS) rose to a seven-month high.
Economists and FX strategies have a pessimistic outlook on the Turkish Lira because of Erdogan retaining office after the election.
Turkish Lira Forecast & Price Prediction – Summary
- Turkish Lira price prediction today: Bankers at JPMorgan have forecasted Turkish Lira is likely to drop sharply right after the elections.
- Turkish Lira price prediction 2023: While forecast agencies estimate USD/TRY to trade around 23 by the end of 2023, the most bearish banks forecast the pair could even trade at 30 without a return to orthodox macroeconomic policies.
- Turkish Lira Forecast for the Next 5 Years and Beyond: Agencies and banks continue to forecast a Turkish Lira decline in the next years under Erdogan.
With CAPEX.com you can trade CFDs on USD/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.
Turkish lira Overview
The fiercely contested presidential and legislative elections in Turkey on May 14 may be the most important in the republic's century-long existence.
They represent a turning point for both Turkish citizens suffering from a cost-of-living crisis brought on by inflation and for foreign investors, many of whom have fled the nation in recent years due to recurrent periods of market unrest.
Since the 2021 currency crisis, Turkish authorities have taken an increasingly hands-on role in foreign exchange markets (forex), with daily moves having become unnaturally small and mostly recording a weakening while foreign exchange and gold reserves have dwindled.
Worth mentioning that several international reports have forecasted a Turkish lira sell-off in the period following the elections, regardless of the identity of the winning party.
At the same time, the reports called for a change in Turkey's monetary policy. The interest rate is anticipated to rise to almost 40% before falling to 22% levels near the end of this year, expectations that the country's finance minister, Nuruddin Nabaty, denied at the time earlier this month.
Erdogan's influence caused the Turkish Central Bank to start lowering interest rates from 14% in October of last year, despite the country's then-rampant inflation. The Central Bank reduced interest rates once more in February, from 9% to the current rate of 8.5%. The bank maintained the rates in March as well.
Turkey’s monetary policy places an emphasis on the pursuit of growth and export competition rather than taming inflation, and Erdogan endorses the unconventional view that raising interest rates increases inflation.
Is there a trading opportunity for foreign exchange (forex) investors in going long or short on the lira following the currency’s nosedive against the dollar, euro, and pound?
The next sections look at the lira’s recent performance, analysts’ expectations, and Turkish lira forecasts.
Turkish lira technical analysis: how low can it go?
On the technical front, the Turkish Lira traded lower, setting new records of decline against the dollar and euro after elections. The pairs continued to trade within the levels of the ascending channels, ccelerating the uptrend since mid-May.
This is explained by JP Morgan: "Initially, lira depreciates, driven by pent-up pressures of the large stimulus ahead of the elections. As financial repression is relaxed, locals increase FX portfolios, while foreigners wait for better valuation entry points."
USD/TRY (US Dollar Turkish Lira Technical Forecast)
On the technical level, the dollar pair rose against the Turkish lira to record its highest levels ever.
The price is moving above the 50, 100, and 200 moving averages on the daily time frame, indicating a strong general upward trend. Due to the difference in monetary policy and the economic situation for Turkey and the expected changes in monetary policy after the elections, any drop in the dollar against the lira it is seen by speculators as an opportunity to buy again (trend following).
Read also: EurUsd forecast and price predictions
The dollar pair against the lira is also trading above the moving averages 50, 100, and 200 on the daily time frame, while the price is trading between these averages on the four-hour time frame, in a sign of the general bullish trend for the pair.
EUR/TRY (Euro Turkish Lira Technical Forecast)
The EUR/TRY currency pair moved above the 20 lira-per-euro mark at the start of the year, reaching an all-time high. EUR/TRY is in a consolidation following a strong uptrend that could result in another leg up according to the latest Turkish Lira forecasts after the elections.
However, the trend may show signs of weakness if the price breaks the trendline below 20.
GBP/TRY (Pound to Lira Forecast)
The GBP/TRY pair moved close to 25 lira per pound following the elections and looks set for another leg up.
A previous resistance level, the 24 became a strong support that attracted buyers after the small counter-trend movements that tested the level.
GBP/TRY is in a strong uptrend that may show signs of weakness if the price breaks below 22.
Turkish Lira forecast: Can TRY to stabilize or it will decline further?
According to Commerzbank, the government and central bank introduced rescue measures, such as incentives to convert foreign exchange (FX) deposits to lira deposits and compulsory conversion of export revenues in order to enhance dollar supply in the market, and the lira exchange rate has momentarily stabilized. The strategy is referred to as "lira-ization" of the economy.
These measures don't deal with the fundamental issues of uneven monetary policy and a dubious central bank per analysts. According to media reports, banks are already intervening in foreign exchange markets to support the lira. Commerzbank anticipates the next significant movement in USD-TRY following a brief respite.
According to ING, the CBT has recently taken certain actions to oversee banks' pricing choices and the makeup of loan portfolios, while also attempting to curb growth in a few specific commercial loan types. These actions are also intended to help the demand for government bonds. Given this context, authorities' goals have remained to maintain a favorable financial environment.
Gross reserves recently increased significantly as a result of swap transactions with banks, growth in the banking sector's FX deposits, and greater FX reserve requirements.
While a slowdown in lending should help the lira, the continued requirement for large levels of external funding, a less rosy prognosis for the world economy, and the preference of policymakers to keep interest rates low should continue to be important variables in deciding the currency outlook.
According to Wells Fargo, it’s a very bleak economic and markets outlook for Turkey. One silver lining in the whole scenario could be the Turkish central bank’s ability to secure currency reserve swap lines with countries in the Middle East and China. If they can continue to draw on those lines and possibly extend and enhance those reserve currency lines, maybe there’s some support in the central bank FX intervention, explains the bank.
JP Morgan cautioned that, even with best intentions, the path to disinflate the economy will be protracted, while it was likely that the central bank would also aim to rebuild its FX reserves.
They added that only a modest return to orthodox macroeconomic policies, including a slower pace of credit growth, some lower levels of financial repression and some path to rebuilding FX reserves, was "unlikely to inspire capital inflows" meaning the lira would "likely remain on a more protracted depreciation path".
The investment bank estimated the lira’s real effective exchange rate (REER), which considers prices and measures its value against other currencies whose countries Turkey does a lot of trade with, was now about 32% below its "fair value".
Meantime, a return to orthodox macroeconomic policies could set lira on a real appreciation trend back towards its fair value". However, initial real appreciation will be driven primarily by prices, with little scope for FX spot appreciation.
Turkish lira price predictions 2022-2025
Analyst consensus indicated that there could be scope for further weakness in the value of the Turkish lira.
US Dollar - Turkish Lira Forecast
The TRY prediction from Danske Bank was the most bearish, with the bank’s analysts forecasting that the USD/TRY rate could reach the 25 levels in 12 months’ time.
“As long as an acute financial crisis can be avoided, the move is likely to be gradual,” the bank commented in a research note on 2 September 2022.
ING forecast that the 20 lira-per-dollar mark could be breached earlier, with the rate potentially hitting 21.20 during Q1 2023 – and reaching 23.30 by the third quarter of 2023.
ING’s USD/TRY forecast shows the pair 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.
Just after the elections, Wells Fargo forecasts that the Turkish lira will reach a new record low of 23 against the dollar by the end of June, and then 25 as early as next year. They expect Turkey’s unorthodox monetary and economic policy frameworks to remain in place going forward.
JPMorgan's analysts said that macro adjustments were expected regardless of the results but laid out two scenarios based on the degree of commitment to more orthodox policies, such as interest rate rises to cool inflation.
In a "strong commitment" scenario they forecasted the Turkish Lira would initially fall to 24-25 to the dollar and to 26 by year end.
If the shift towards more orthodox polices looks like being more modest, however, the bank forecast Turkish lira could drop to close to 30 to the dollar by the end of 2023 albeit with a slower initial drop while bond yields were unlikely to adjust much in this scenario.
Trading Economics was also bearish in its Turkish lira projections as of February 2023, forecasting that the USD/TRY rate could move from 19.064 at the end of this quarter to 19.83 in a year’s time.
In its Turkish lira forecast for 2023, algorithm-based forecast website WalletInvestor saw the USD/TRY currency pair averaging 19.46 during Q1, with a high at 20.56. The website’s Turkish lira forecast for 2023 saw the currency decline further against the US dollar, ending the year at a potential average of 22.78.
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 of 30.727 by the end of that year.
The American dollar to Turkish lira forecast from SEB Group expected a somewhat slower rise towards the 23 levels, with 22.50 in a year’s time.
Euro - Turkish Lira Forecast
The move above 20 for Eur against the Turkish Lira was forecasted by Commerzbank during the 2nd quarter of 2022. However, the bank forecasted the Turkish Lira to rebound and trade at 17.92 by the fourth quarter of 2023.
Like its USD/TRY forecast, TradingEconomics forecast Euro Turkish Lira to be priced at 20.0094 by the end of this quarter and at 19.7878 in one year, according to Trading Economics global macro models projections and analysts' expectations.
Pound - Turkish Lira Forecast
Additionally, TradingEconomics forecast a pound-to-lira rate of 22.8973 by the end of this quarter and 25.4107 in 12 months’ time.
Analysts at Monex expected the pair to stabilize, with the UK foreign currency firm’s USD/TRY forecast that the lira could then strengthen slightly, moving the pair back to 17.50. Analysts have yet to issue a pound-to-lira forecast for 2030.
Due to market volatility, no bank or algorithm-based forecast website issued a 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’s performance. 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.
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Trading a USD/TRY CFD
USD/TRY has a Sell price of 18.84560 and a buy price of 18.5972. You think the Turkish Lira will lose value against the US dollar because the Central Bank of Turkey might cut interest rates, so you decide to buy 0,5 standard lots at 18.5972.
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 of 3712.6914 USD (minus 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.
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 of 1,591.8175 (in addition to any overnight charges).
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