Are FX rates Rising or Is TRY Depreciating?

Are FX rates Rising or Is TRY Depreciating?


Every Turkish citizen has been asking this question since August 1958. Because the biggest devaluation in the history of the Republic of Turkey happened on 4 August 1958, when the dollar was 2.9 Turkish liras, and it was officially increased to 9 liras, but sold for 20 on the black market. The price and weight of bread back then can help us have an idea about the magnitude of this devaluation.

The depreciation of the national currency in Turkey was due to two main reasons:

The first reason was insisting on things that are unlikely to succeed. And the second reason was ignoring the consequences and never learning from them.

Of course, there are also reasons such as the depletion of foreign currency reserves, current account deficit, etc. but government errors are the biggest factor. The result has always been the same. Depletion of reserves and devaluation of national currency.

Today, the government revaluates the currency, which means the decision makers who are responsible for managing the economy are trying to keep the value of Turkish lira stable or increase its value outside the market conditions. Sooner or later, the foreign exchange rates will rise again. They are already rising every day, making the need for a devaluation unnecessary, since the markets roughly move the exchange rates towards the level where they think they should be.


There is another danger as well: The Government faces a serious foreign exchange risk in order to prevent exchange rates from going up again. Their own erroneous practices put the Treasury and the Central Bank under an enormous burden, but it is the people that pay the price for their mistakes. Remember how harshly an analyst was criticised and condemned years ago for saying that one US dollar would be 15 Turkish liras. The analyst was neither to blame nor to be doubted. His forecast turned out to be right because he knew that the reason behind lira’s depreciation was socio-political rather than economic.


If the laws in a country are continuously changing, if claims and insistence overcome science, if security policies are considered a priority instead of normalization, if a free market system does not exist, if loans are too hard to get, if social peace is constantly disrupted by constitutional and legal changes, and if certain groups are provided with privileges while others are not treated with justice, it becomes impossible for that country’s currency to appreciate or stabilize. But let’s not despair: just a change of thought and approach can make it possible to eliminate these adversities.


The economic success of a country deeply depends on the presence of a government that acts as a referee to make individuals and organisations compete under equal rights. Trust and confidence in a government can only be established when investors remain assured that their rights will not suddenly be taken away from them, and when producers are confident that their costs will not keep increasing because of the protection of certain sectors. Trust leads to a prosperous future provided that it is mutual. A government should also trust its citizens. There will be no pre-conviction.

It is the well-equipped, well-educated citizens who will ensure a bright future for their country. Allowing qualified people to take initiative is the job of task-oriented leaders. If they don’t do that, it is because either these leaders or the persons assigned are poorly qualified.


So, the appreciation of a national currency is closely associated with that country’s approach to civilization, its form of diplomacy and politics, its respect for science, art and sports, its ability to work in a planned manner, and ultimately its capability of expressing its values to the world. Unless these requirements are satisfactorily met, our economy and our households will continue to suffer from ever-soaring exchange rates.


It is not about not the level that the dollar is supposed to be, but it is rather about what should be done exactly to stabilise TRY. Let’s think about the improvements that Turkey needs to ensure this stabilisation and the probability of these happening in the short or medium term. Once we understand and accept what direction exchange rates might move next, let’s leave the rest to the experts of technical analysis.