FX.co ★ Turkish Lira Extends Controlled Weakening

In late December, the Turkish lira fell to an unprecedented low of 42.85 against the US dollar, continuing a controlled devaluation strategy orchestrated by the Central Bank of Turkey. Market observers are evaluating the anticipated currency flow dynamics for the coming year against this backdrop. The central bank is actively managing its foreign exchange reserves and implementing strategies to bolster lira deposits from domestic investors. These efforts aim to regulate the currency's depreciation, which is projected to diminish by approximately 18% in value against the dollar over the year. Throughout the year, the TCMB slashed its key interest rate by 9.5 percentage points to 38%, as inflation decelerated to a four-year low of 31% in November. However, price growth is expected to close the year exceeding the target rate of 24%. In comparison, the national minimum wage is set to rise by 27% next year, aligning with forecasts but perpetuating the trend of official inflation figures falling short, further straining household purchasing power.