FX.co ★ Turkish Lira Hits New Low

In December, the Turkish lira set a new record low, surpassing 42.4 per US dollar, marking a year-to-date decline of approximately 20%. The currency's controlled depreciation, ongoing since July 2023, has continued amid renewed concerns regarding Turkey's political circumstances, which persistently affect investor confidence. In early November, Finance Minister Mehmet Simsek contended that the apprehensions surrounding the lira are now "no longer based on fundamentals." He highlighted significant improvements, including a sharp reduction in the current account deficit, enhanced access to international capital markets, and stronger financial indicators. In October, inflation in Turkey eased more than anticipated, reaching 32.87%, the lowest level since November 2021. The central bank adjusted its inflation forecast for the end of 2025 to a range of 31%-33%, up from the previous 25%-29% projection, while maintaining its 2026 projection at 16%. The monetary authority has already enacted three consecutive interest rate cuts, totaling 650 basis points. Concurrently, the Turkish economy expanded by 3.7% in the third quarter, slowing more than expected.