Turkish Lira 2025 Trend: Investment Opportunities Analysis of EUR/TRY and USD/TRY

The Turkish Lira, as an emerging market currency, has attracted the attention of global traders. Especially for investors engaged in forex trading, understanding changes in Turkey’s economic policies and geopolitical risks is crucial. Since 2024, the Turkish Lira has depreciated approximately 12% against the euro and about 17% against the US dollar. The reasons behind this deserve in-depth exploration.

Changes Brought by Turkey’s New Economic Team

After Erdogan’s re-election in May 2023, Turkey launched economic reforms. The appointment of new Finance Minister Mehmet Şimşek (former Merrill strategist) and Central Bank Governor Fatih Karahan (took office in February 2024) marked significant policy shifts. The market responded positively, with the Turkish stock market achieving a 153% increase from May 2023 to August 2025.

The core achievement of the reforms is in inflation control. The Central Bank of Turkey raised interest rates aggressively from 8.5% in February 2023 to 50% in March 2024, successfully reducing inflation from over 75% to around 35%. Subsequently, the central bank began a gradual easing cycle, with the benchmark rate currently at 43%. Official inflation targets are set at 24% for 2025, 16% for 2026, and 9% for 2027, indicating policymakers have a clear roadmap for inflation control.

EUR/TRY Outlook: Factors for Rise and Fall Coexist

Currently, EUR/TRY is trading around 1:47.73, significantly higher than its historical lows. Evaluating the future performance of the euro against the lira requires weighing multiple factors:

Factors Supporting Euro Appreciation: Market doubts about Turkey’s economic policy stability persist. Although inflation has declined markedly, Turkey’s central bank governors have historically been replaced frequently (e.g., Naci Ağbal, appointed in November 2020, was dismissed in March 2021 due to policies conflicting with Erdogan’s views). Investors remain cautious about policy sustainability. Additionally, the European Central Bank may keep interest rates steady in the near term, supporting the euro. As a Muslim-majority country, Turkey’s political stance amid Middle Eastern tensions could carry risk premiums.

Factors Supporting Lira Appreciation: Turkey’s significant progress in reducing inflation has exceeded expectations. The country’s 2025 economic growth forecast is about 3%, surpassing the Eurozone’s 0.9%. From an absolute interest rate differential perspective, Turkey’s 43% benchmark rate is far above the European Central Bank’s 2%, attracting capital inflows. Meanwhile, debt risks within the EU (high debt levels in Greece, Spain, Italy, etc.) could weaken the euro.

In this context, the long-term outlook for EUR/TRY depends on whether Turkey can maintain policy coherence and whether European economic growth can accelerate.

USD/TRY Dynamics: The US Dollar’s Relatively Stable Outlook

The US dollar index has fallen 6.7% since November 2024, when Trump was elected, but during the same period, the dollar against the lira appreciated about 17%, indicating that Turkey-specific factors (mainly inflation) are at play.

The US economy remains optimistic through 2025, with Goldman Sachs forecasting a growth rate of 2.5%, higher than Turkey’s expected 2.7%-3.5%. The Federal Funds Rate is currently maintained in the 4.25%-4.50% range, with two more rate cuts expected this year. However, US inflation in July 2025 remains at 2.7%, a relatively high but stable level, which may cause the Fed to remain cautious about cutting rates.

From the USD/TRY perspective, higher US benchmark rates generally support the dollar from an isolated standpoint. However, Trump’s trade protectionism and domestic subsidy policies could further strengthen the dollar. This suggests that USD/TRY may continue to exert downward pressure on the lira in 2025.

External Risk Factors

While the Middle East situation has not directly involved Turkey in military conflict, evolving regional dynamics could pressure the lira through trade restrictions or energy price fluctuations. Additionally, Turkey is located in a high seismic activity zone; the earthquake in early 2023 caused over 50,000 deaths, and future natural disaster risks remain a concern.

The prospects for peace in the Ukraine conflict will also influence EUR/TRY. A ceasefire could lead to lower European energy prices and improved economic outlooks, benefiting the euro; ongoing escalation would put pressure on the euro.

Summary of Turkey Lira TL/EUR Forecast for 2025

The performance of the Turkish lira in 2025 largely depends on policy stability. If the new economic team can sustain the rate hike cycle and fiscal discipline, and continue to pursue inflation targets, the lira could appreciate. Conversely, if past policy swings recur, the lira will continue to depreciate.

Forecast for EUR/TRY: Compared to USD/TRY, the Turkish lira’s outlook against the euro is relatively optimistic. Weak European economic growth and debt pressures may limit euro appreciation. If the lira successfully stabilizes inflation, EUR/TRY might see slight retracements within the year.

Forecast for USD/TRY: The US economy’s growth and trade policy advantages could continue to support the dollar, and USD/TRY may have upside potential in the short term.

How Traders Should Respond

Given the high volatility of the Turkish lira, forex traders should adopt the following strategies:

• Use stop-loss orders (Stop-Loss) and take-profit orders (Take-Profit) to strictly manage risk
• Regularly monitor Turkey’s central bank policy statements and inflation data
• Diversify investments and avoid over-concentration in a single currency pair
• Pay attention to geopolitical developments, especially in the Middle East and European energy supplies

The outlook for the Turkish lira TL/euro is full of uncertainties but also trading opportunities. Deep understanding of market fundamentals and strict risk management are essential for profiting in this highly volatile market.