Exchange rate
Key points
- Lira depreciation raises import prices and inflation and lifts exporters’ lira revenue.
- The rate directly determines the lira return of FX deposits, eurobonds, foreign stocks and gold.
- predicting the direction of the rate is extremely hard; past trends do not indicate the future.
Formula / calculation
the bid rate is where the bank buys currency and the ask rate where it sells; the difference is the bank’s margin. A cross rate is the ratio of two foreign currencies (EUR/USD). The real effective exchange rate adjusts the rate for inflation differentials and shows whether the lira is strong or cheap.
Interpretation
The CBRT announces indicative rates every business day at 15:30 and banks quote bid and ask.
The rate directly determines the lira return of FX deposits, eurobonds, foreign stocks and gold. On BIST, exporters and companies with FX revenue benefit from a rising rate while FX-indebted companies suffer.
Pitfalls
predicting the direction of the rate is extremely hard; past trends do not indicate the future. Bank spreads and commissions reduce returns. When computing USD-based returns the correct bid and ask rates must be used.
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Frequently asked questions
What is Exchange rate?
An exchange rate is the price of one country’s currency in terms of another; in Türkiye the most watched pairs are USD/TRY and EUR/TRY.
How is Exchange rate calculated?
the bid rate is where the bank buys currency and the ask rate where it sells; the difference is the bank’s margin. A cross rate is the ratio of two foreign currencies (EUR/USD). The real effective exchange rate adjusts the rate for inflation differentials and shows whether the lira is strong or cheap.
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