The Turkish lira has fallen in value against the dollar and other currencies as the government's monetary policy have kept interest rates low rather than raising them to combat inflationary pressures.The Turkish lira hit a new low against the US dollar in December and is still under compression against other currencies as a result of a variety of monetary policies and dollar strength, particularly rising energy prices caused by the Russia-Ukraine conflict.

The TRY/USD pair is often labelled the worst-performing currency pair because of long-running structural and policy-driven weaknesses in Turkey’s economy. The biggest factor has been persistently high inflation, which erodes purchasing power and steadily weakens confidence in the lira. While inflation surged, interest rates were repeatedly kept low, going against standard monetary practice and discouraging foreign capital.

Another key issue is political influence over monetary policy. Markets lost trust in the independence of the Central Bank of the Republic of Turkey, especially after frequent leadership changes. This created uncertainty and made investors demand higher risk premiums or exit altogether. As capital flows reversed, the lira faced continuous selling pressure against the US dollar.

Turkey’s large current account deficit has also played a role. The country relies heavily on imported energy and raw materials, which increases dollar demand. When global conditions tighten and the dollar strengthens, the impact on TRY/USD becomes even more severe. External debt denominated in foreign currencies further amplifies the problem, as depreciation raises repayment costs.

Finally, declining foreign exchange reserves and periodic market interventions have reinforced negative sentiment rather than restoring confidence. Together, high inflation, weak policy credibility, external imbalances, and global dollar strength explain why TRY/USD has shown a long-term downward trend and is widely viewed as one of the poorest-performing currency pairs in recent years.