Recently, someone asked me why I pay attention to the Turkish lira. I said, look at this currency—it's a textbook example of a "high risk, high volatility, high interest rate" combo, especially suitable for those wanting to understand emerging market currency crises.

The Turkish lira (TRY) has been depreciating over the years, mainly due to two deadly factors stacking up: first, the central bank's policy credibility has completely collapsed; second, inflation just won't come down. Think about it—back in 2001, the lira to USD was as bad as 1.65M:1. Although a currency reform was carried out in 2005 (1 new lira replaced 100,000 old lira), this history alone shows how deep the problems run.

Things have gotten even worse in recent years. During periods of soaring prices, the Turkish central bank kept cutting interest rates, eroding market confidence in its independence, and capital fled rapidly. Businesses and citizens hoard dollars and euros, and the lira becomes less and less desirable. Even more absurdly, Turkey's economy heavily relies on imports—energy and raw materials are bought in USD—so when the lira depreciates, import costs skyrocket, prices rise again, and market confidence drops further, creating a vicious cycle. Plus, geopolitical risks have increased in recent years, making foreign investors more cautious about Turkish assets.

This is why the depreciation of the Turkish lira isn't a short-term event but the result of policy mistrust, economic imbalance, and political risks brewing together.

Speaking of recent exchange rate trends, I noticed an interesting phenomenon. From early 2026 to now (mid-May), the USD/TRY has gone from around 43 at the start of the year to about 44.85, with April continuously hitting new lows. It looks like a sharp depreciation, but actually, the pace has slowed compared to 2025, with a cumulative decline of about 4.3 to 4.5%. The depreciation pressure in the first half of the year mainly came from external shocks. Although inflation has fallen from over 30% at its peak to 30.87% now, it still remains far above normal levels. The central bank maintains a high policy rate of 37%, also intervening with foreign exchange reserves, but market expectations fluctuate, and the lira continues to weaken gradually within the 43 to 45 range.

In the short term, USD/TRY is likely to fluctuate between 44.8 and 46.5. The central bank's rate decision on April 22 has already passed, and market focus has shifted to energy price volatility and geopolitical risks. EUR/TRY is currently between 52.7 and 53.0, with the euro relatively strong but still unable to offset Turkey's high inflation and policy uncertainty. TWD/TRY hovers narrowly between 1.42 and 1.43, with a short-term forecast of trading within 1.40 to 1.48.

A particularly noteworthy risk signal: to support the lira, the central bank has sold large amounts of USD and gold, depleting billions of dollars in foreign reserves, with net reserves visibly declining. If continued intervention causes reserves to fall too low, the central bank may be forced to abandon support, leading to a sharp lira depreciation.

Is it still worth investing in the lira now? I think it can be, but it depends on what type of investor you are. Over the past year, the lira has depreciated 19% against the dollar, and analysts generally forecast another 8-15% decline through 2026. Although the central bank offers high interest rates (37% for overnight loans approaching 40%), after accounting for inflation, the real return is often negative, meaning long-term holding erodes purchasing power.

If you have experience with short-term forex trading, the high volatility of the lira can be an opportunity—used as a short-term trading instrument, monthly swings often reach 10%. But don’t expect to profit from the lira appreciating; that’s too difficult and risky. My advice is to stagger your positions to diversify risk. If you’re optimistic about Turkey’s reform prospects, you can gradually convert USD into a small amount of lira, using technical rebounds for short-term trades—absolutely avoid going all-in.

Regarding investment tools, bank currency exchange suits those who want to hold actual lira, but with high spreads and low liquidity. Futures allow two-way trading and leverage, but lira futures are illiquid, and most brokers don’t offer them to retail investors. CFDs are the most efficient choice—accounts can be opened for under $100, they support shorting, and offer high leverage—especially suitable for traders looking to capture lira’s volatility.

In summary, although the Turkish lira isn’t a focus for most investors, its trend is quite clear, and the turning points are identifiable. You can choose your trading approach based on your risk tolerance and investment style, while closely monitoring macroeconomic and political news to improve your judgment accuracy.