Turkish Lira falls historically lowest real value

By bne IntelliNews October 7, 2015

The real effective exchange rate (REER) of Turkey's lira fell to its lowest level ever in September, losing a third of its value against the dollar, according to the central bank as the entire region is wracked by currency instability. 

The lira (TRY) fell from 95.09 in August to 90.95 in September, the lowest real value since the REER index was first calculated in January 2003, Turkish Central Bank announced on October 6. A decline in the REER represents a depreciation of the TRY in real terms. REER’s August value was also its lowest since April 2003.

The Turkish lira has tumbled this year, losing about a third of its value against the dollar to fall through the psychologically important TRY3 to the dollar, as political uncertainty, security concerns weigh on investor and consumer confidence. The Turkish economy continues to feel the effects of the country’s escalating violence and political instability at a time when it should be benefiting from tumbling oil prices. As long as political uncertainty and violence in the country’s mostly Kurdish southeast continue the lira is likely to remain under pressure.

Moreover, the higher than expected inflation adds to concerns. Consumer prices rose by 0.89% m/m in September (Reuters survey: 0.80% m/m), bringing the annual inflation rate from 7.14% in August to 7.95%, data of the statistics office showed on October 5. Morgan Stanley recently argued that currency depreciation is likely to damage the inflation outlook in the last quarter of the year. In line with this, the investment bank increased its year-end CPI expectation to 8.0% from 7.6%. Fitch revised its 2015 inflation expectation up to 7.1%, reflecting the depreciation of TRY, and expects a 6.4% inflation next year based on the assumption of more currency stability and a tightening policy from the central bank, Fitch Ratings Senior Director Paul Gamble said on September 22. End-year inflation expectations rose to 7.98% y/y in September on the back of higher than expected August inflation.

The falling currency, on the other hand, hasn’t boosted exports as much as expected because the generally glum economic mood in the rest of Europe has hit Turkish exports. These trade dynamics combined to undo some of the benefits of the lower energy prices, slowing the fall in the country’s current account deficit, Basci commented on September 29. Turkey’s exports fell 20% y/y, the sharpest decline recorded in 2015, in September due to three-day long festive holiday, said the Turkish Exporters’ Assembly (TIM) on October 1. 9-month decline in exports stood at 10% y/y.

REER of TRY
Jan-03 89.55
Dec-03 101.44
Dec-04 102.48
Dec-05 119.60
Dec-06 109.88
Dec-07 127.73
Dec-08 110.70
Dec-09 112.61
Dec-10 119.19
Dec-11 102.74
Dec-12 110.30
Dec-13 100.95
Jan-14 95.86
Feb-14 96.49
Mar-14 96.91
Apr-14 102.49
May-14 104.64
Jun-14 104.05
Jul-14 104.20
Aug-14 103.61
Sep-14 103.13
Oct-14 103.81
Nov-14 106.94
Dec-14 105.51
Jan-15 108.34
Feb-15 105.42
Mar-15 103.75
Apr-15 102.15
May-15 100.63
Jun-15 98.36
Jul-15 99.75
Aug-15 95.22
Sep-15 90.95
source: tcmb

Related Articles

Turkey postpones plan to sell firms seized after coup attempt

Turkey has put on hold its plan to sell almost 600 companies worth about $10bn seized in the aftermath of the failed military coup, people familiar with the matter told Bloomberg on March 23. The ... more

Turkey to maintain EU economic relations but review political ties, says Erdogan

Turkey will maintain its commercial ties with the European Union but will review its political and administrative ties with the bloc after the April 16 referendum, Turkish President Recep Tayyip ... more

Turkey easily tops table for Twitter content removal requests

Turkey accounted for more than half of all content removal requests received worldwide by Twitter during the second half of 2016, according to the social media company’s ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss