TRY stands for Turkish currency, the new lira, which is now in its second edition. The Turkish lira is the national currency of Turkey. However, the new Turkish lira can be broken down into 100 new exchange rate coins, usually represented by the letters YTL. From a historical point of view, the Turkish new lira was first introduced in early 2005. It was equal to one million old Turkish lira. During the 2005 revaluation, the government removed six zeros from the value of the currency. The ninth edition of TRY was printed in 2009.
I will explain to you the history of how the release of the Turkish lira as a currency is divided into two periods. The first Turkish lira was in use between 1923 and 2005 (it remained in force and in circulation until the end of 2005). At the same time, the second period of the Turkish lira began in 2005. As a currency, the TRY is pegged to the French franc and the British pound, as well as hard and softly pegged to the U.S. dollar, throughout its history. There is no longer an explicit click, but Turkey is actively intervening in the currency markets and trying to influence the value of the TRY.
History of TRY (New Turkish Lira)
In response to the economic crisis in 2001, the Turkish lira began to lose value. State-owned enterprises, such as telecommunications companies and oil refineries, have been privatized, and the central bank has pursued a tight monetary policy, trying to limit consumption and ensure that inflation does not destroy economic gains. Before these economic reforms took place, the Turkish economy was heavily dependent on foreign aid, as about 80% of Turkey’s GDP was external debt.
The main factors affecting the USD / TRY currency pair
The currency pair USD / TRY is usually affected by factors that affect the value of the US dollar and the Turkish lira, relative to each other and to other currencies. Therefore, the difference in interest rates between the Central Bank of the Republic of Turkey and the Federal Reserve (Fed) has a significant impact on the value of these currencies compared to each other. It is worth recalling that the Turkish lira fell by more than 20%, falling to a record low territory, against the US dollar on August 10, 2018. However, the reason for this could be related to economic and geopolitical problems. In addition to suffering from rapidly rising inflation and political pressure to keep interest rates low, the country has faced an impending debt crisis that has threatened further pressure on both the economy and the currency.
Factors affecting USD / TRY prices:
The USD / TRY currency pair is affected by factors that determine the value of the US dollar and the Turkish lira, compared to each other and other currencies. Therefore, the difference in interest rates between the Federal Reserve (Fed) and the Central Bank of the Republic of Turkey will affect the value of currencies compared to each other.
CBRT and interest rates:
Determining the interest rate could be considered one of the most important tasks of the CBRT. The structure of Turkey’s monetary policy is designed to keep inflation low and stable. Therefore, the artificial environment with low interest rates contributed to additional constant pressures on the Turkish lira.
The relationship between the United States and Turkey has been deteriorating in recent years, which usually undermines the Turkish economy and its currency.
Economic data such as the Consumer Price Index (CPI), Gross Domestic Product (GDP), Trade Balance, Retail, Labor Force Survey (Canadian Unemployment Statistics) and Industrial Price Index have a major impact on USD / TRY prices.
Potential Turkish debt crisis:
Turkey’s heavy debt burden to other countries is reflected in an extraordinarily high percentage of its foreign currency-denominated debt. As the Turkish currency continues to undermine, it is becoming increasingly difficult and expensive for Turkey to manage this foreign debt, further exacerbating the currency’s decline. Furthermore, the extremely large current account shortage in Turkey further increases the country’s potential to fall into a serious debt crisis. Let me point out that Turkish loans amount to $ 265 billion, or less than 1% of the total worldwide, according to the Bank for International Settlements.
Relations between countries tend to grow or undermine their economies. They increase the range of consumers reached geographically and demographically, by interactions such as imports and exports, but they also allow economic fluctuations of other countries to affect their economy.