USD-TRY appreciates by 0.38% as political concerns hamper Turkey's currency

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The USD/TRY pair appreciated by 0.38% on Friday according to Bloomberg, as state entities sold $6 billion to hold the Turkish Lira up from losing value as the economy deals with political instability. 

The update comes alongside India’s record lows for the Rupee, as government institutions around the world acknowledge that inflation and dented consumer sentiment could be an issue on the cards for a while. 

The country has been dealing with a poor Turkish Lira for a while, and it mainly comes from a general dampening of confidence in the Turkish economy due to political interference. Negative sentiment in political affairs and an inflated Turkish lira have led to reduced confidence in the currency. Residents on the whole prefer to keep their money in other currencies that are better able to hold value. 

Due to the Turkish Lira’s position as an exotic pair currency, it has been considered an option of interest for professional traders who want to use carry trade positions in the market. 

While carry trades based on interest rate differentials can attract professional traders, they carry significant risks including rapid currency reversals and margin exposure

The rationale used is that the Turkish Lira’s relatively low borrowing rate allows for carry trades to happen because of the interest rate differential. However, in a scenario where there is an increase in the borrowing rate of the Turkish Lira to discourage inflation, this interest rate differential becomes less appealing for traders. 

[Risk note: carry trades involve significant risk and are generally suited to experienced market participants only.]

Turkey has been dealing with a pattern of inflation established as part of a long-term trend: The country relies on global trade for major imports of critical goods and services. As Turkey is a major energy importer, it needs U.S. dollars and forex reserves to ensure these trades take place. 

All major-pair currencies appreciated against the Turkish Lira on Friday by the following amounts:

• USD/TRY: +0.37%
• EUR/TRY: +0.26%
• GBP/TRY: +0.30%
• AUD/TRY: +0.23%
• NZD/TRY: +0.31%

Turkey is not the only country dealing with a weakening currency. India and Japan over the past week have also referred to inflation concerns as a potential issue for their economies. Similar to Turkey, India also is facing an issue of depleted forex reserves. 

However, in contrast to Turkey’s approach of mass selling dollars in exchange for Lira, India and Japan are considering different avenues to help shore up the value of its currency. 

India’s strategy for now is to limit imports of non-essential goods such as gold and silver so as to ensure a steady supply for critical goods for the dollars it currently has. Japan on the other hand has yet to implement any measure although the country historically has tried to keep its interest rates low. 

Summary

Inflation concerns have now affected multiple countries, and each country is adopting a different approach, either adopting to remain neutral or to implement a set of measures meant to protect the value of the currency. 

Research references

• Turkey Prepares for Market Impact After Court Blow to Opposition - Bloomberg (accessed May 22, 2026)
• Rupee Plunge Sees India Turn to 2013 Taper Tantrum Playbook: INR/USD - Bloomberg (accessed May 22, 2026)
• Turkey’s FX Sales Reach $6 Billion After Opposition Ruling - Bloomberg (accessed May 22, 2026)

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