The Turkish lira’s story continues to be one of rapid erosion and ongoing volatility. In the first half of 2025, the lira crossed the symbolic threshold of 40 TRY per USD, down from about 19 TRY/USD in early 2023. That’s a depreciation of nearly 110% in just over two years. Behind this dramatic drop lie persistent inflation, dwindling foreign currency reserves, political interference in monetary policy, and weak investor confidence.
While for local citizens this trend represents a painful decline in purchasing power, for strategic investors—especially those equipped with modern trading tools—it also offers a range of opportunities. In this article, we explore several ways to gain exposure to lira depreciation, from equities and ETFs to derivatives and short positions.
Why the Turkish Lira Keeps Falling
Turkey’s inflation rate hovered around 67% year-over-year as of Q1 2025, despite aggressive policy tightening by the Turkish central bank. Interest rates have been raised to 50% to curb inflation, but structural factors—like a persistent current account deficit and low foreign reserves (under $ 50 billion as of April 2025)—continue to pressure the currency. The IMF and other global agencies have repeatedly flagged Turkey’s economic vulnerabilities, particularly its heavy reliance on external borrowing.
The lira’s weakness is part of a broader pattern affecting several emerging market currencies, especially those in politically unstable or fiscally unsustainable regimes. But unlike in the past, retail investors now have access to advanced financial instruments once limited to hedge funds.
1. Shorting the Turkish Lira (or TRY-Pegged Instruments)
Short selling the lira directly is now easier than ever via currency brokers and platforms offering forex trading accounts. Investors can take short positions on the TRY against stable currencies like the USD, EUR, or CHF using spot FX or via leveraged contracts for difference (CFDs). These allow you to profit if the lira continues to fall.
For example, in 2024, traders who shorted TRY/USD from 30 to 40 earned a 33% return, minus costs and spreads. This requires risk management, as the TRY is highly volatile and can experience government intervention—such as capital controls or central bank market interventions.
2. Using Currency Futures for Speculation or Hedging
On platforms like the CME or ICE, investors can trade Turkish lira futures, which are standardized contracts that allow you to bet on the future exchange rate of the TRY against the USD. These contracts require margin and offer leverage, so even small currency moves can result in substantial gains—or losses.
For institutions and more advanced investors, these are ideal to hedge emerging market exposure or to speculate on further devaluation. For example, open interest in TRY/USD futures rose by 18% in Q1 2025 as institutional investors positioned for continued lira weakness amid soaring inflation.
3. Equities Positioned to Benefit from Depreciation
Some Turkish companies are actually beneficiaries of the lira’s decline—particularly exporters and multinational conglomerates with foreign earnings. These companies earn in dollars or euros and report in lira, so currency devaluation enhances revenue in local terms.
Major players like Ereğli Demir ve Çelik (Erdemir), Turkcell, and Tofaş saw earnings per share (EPS) in lira rise over 40% year-on-year in 2024, largely driven by FX gains. International investors can access such equities through ETFs like the iShares MSCI Turkey ETF (TUR), though caution is warranted due to potential political risk and volatility.
4. Bond Shorting or Inverse ETFs
With Turkish sovereign bonds under pressure due to high inflation and negative real yields, shorting Turkish debt (either through derivatives or using inverse bond ETFs) can be another way to position against the lira and local asset weakness. While such inverse ETFs specifically for Turkey may be rare, investors can replicate exposure by shorting emerging market bond ETFs that are heavily weighted toward Turkish paper.
For instance, the average yield on Turkish 10-year government bonds reached 35% in March 2025, with many bonds trading at significant discounts in international markets. Credit default swaps (CDS) on Turkish sovereign debt rose to over 600 basis points, reflecting increased default concerns.
5. The Carry Trade Is Back—But Risky
The ultra-high interest rate environment (benchmark at 50% in 2025) makes the Turkish lira theoretically attractive for carry traders. Investors borrowing in low-yielding currencies like the Japanese yen or Swiss franc can earn high interest differentials by holding lira-denominated deposits or assets.
However, the lira’s tendency for sharp, unpredictable depreciations offsets this yield advantage. Backtests show that a theoretical yen-to-lira carry trade initiated in late 2023 would have returned over 25% by mid-2024—if not offset by volatility or sudden policy announcements.
Final Thoughts: Strategy Over Speculation
Profiting from the depreciation of a currency like the Turkish lira requires more than just luck—it requires preparation, strategic thinking, and awareness of macroeconomic conditions. While tools like futures, short selling, ETFs, and the carry trade open new doors for retail and professional investors alike, each carries its own risk profile.
In 2025, with emerging markets facing new forms of monetary and geopolitical stress, having a flexible playbook is essential. Investors willing to navigate the volatility can potentially benefit not only from tactical trades but also from building longer-term strategies grounded in fundamentals and disciplined risk management.
Title for Final Section: Tactical Advantage in a Volatile World
In a time when volatility is the new normal, turning crises into opportunities is no longer reserved for hedge funds. With access to advanced instruments and real-time macro data, individual investors can now tactically position themselves to benefit from global currency trends—if they know where to look and how to manage the risk.
