The Role of USD/TRY, EUR/TRY and the Real Effective Exchange Rate in Corporate Financial Management Decisions in Türkiye

For companies operating in Türkiye, exchange rates are not a market variable affecting only exports and imports. Currency moves feed through to sales revenues and raw-material costs, borrowing and investment decisions, working-capital needs and company value. The CFO should therefore monitor USD/TRY and EUR/TRY separately and the real effective exchange rate (REER) as a broader competitiveness and cost indicator complementing these two nominal rates.

1. USD/TRY: a core indicator for cost, debt and cash flow

A rise in USD/TRY means the lira has depreciated against the dollar. In Türkiye, prices of energy, commodities, intermediates, technology, software licences, freight and many capital goods are linked directly or indirectly to the dollar, so USD/TRY quickly affects the cost structure of companies using imported inputs. A weaker lira raises inventory replacement cost, pressures gross margin and, in sectors where prices cannot be raised as fast, increases working-capital need.

If the company has dollar loans, leasing or trade payables, the impact also appears on the balance sheet. A company with dollar debt but mainly TL revenues sees its open FX position widen when the rate rises; TL equivalents of principal and interest payments increase. A company with dollar export revenues may have natural hedge. But matching total FX inflows and outflows is not enough; maturities, currencies and cash-flow dates must align too.

USD/TRY also affects investment decisions. While TL cost of imported machinery changes, the currency of future project cash flows matters. Financing a project that does not generate FX revenue with FX debt can create significant currency risk even if the interest rate looks low.

2. EUR/TRY: a rate to watch separately for Europe-linked companies

The financial effect of EUR/TRY is similar to USD/TRY but its weight depends on commercial geography. For firms selling to the European Union, importing machinery, raw materials or intermediates from Europe, or using euro loans, EUR/TRY becomes more critical. For an exporter with high euro sales, a rise in EUR/TRY can increase TL revenue when foreign-currency prices are unchanged. Conversely, high euro imports and debt turn the same move into cost and financing pressure.

The CFO should monitor not only EUR/TRY but also EUR/USD. If sales are in euros and inputs in dollars, a fall in EUR/USD can weaken profitability even when EUR/TRY rises. FX risk should therefore be managed by the currency mix of revenues and costs, not by asking simply whether the company has FX exposure.

If sales are in euros and inputs in dollars, watching EUR/TRY alone is insufficient. EUR/USD determines the purchasing power of euros earned relative to dollars paid. When EUR/USD falls, the euro weakens against the dollar and dollar costs can weigh more heavily on euro revenues.

Suppose a transaction with 100 EUR revenue and 60 USD input cost.

Case 1: EUR/TRY = 50 and EUR/USD = 1.20. Then USD/TRY ≈ 50 / 1.20 = 41.67 TL.

• Sales revenue = 100 × 50 = 5,000 TL
• Input cost = 60 × 41.67 = 2,500 TL
• Gross profit = 2,500 TL

Case 2: EUR/TRY rises 10% to 55 but EUR/USD falls from 1.20 to 1.00. Then USD/TRY = 55 / 1.00 = 55 TL.

• Sales revenue = 100 × 55 = 5,500 TL
• Input cost = 60 × 55 = 3,300 TL
• Gross profit = 2,200 TL

Indicator	Case 1	Case 2
EUR/TRY	50	55
EUR/USD	1.20	1.00
USD/TRY	41.67	55
Sales revenue	5,000 TL	5,500 TL
Input cost	2,500 TL	3,300 TL
Gross contribution	2,500 TL	2,200 TL

Despite the rise in EUR/TRY, gross contribution falls from 2,500 TL to 2,200 TL. Euro revenue rose 10% but the TL equivalent of dollar cost rose much faster. EUR/USD moving from 1.20 to 1.00 means each euro earned buys fewer dollars.

The CFO should therefore not ask only “Is the euro rising?” When revenues are euro and costs dollar, EUR/USD directly affects margin. EUR/TRY, USD/TRY and EUR/USD should be monitored together and FX risk managed by matching revenues and costs by currency.

3. Real effective exchange rate: from nominal rate to competitiveness

In the CBRT definition, the nominal effective exchange rate is the trade-weighted average value of the lira against currencies of Türkiye's main trading partners; REER adjusts this for relative price movements across countries. A rise in the index shows real appreciation of the lira; a fall shows real depreciation.

REER matters for management because it adds competitiveness information nominal rates alone cannot give. If USD/TRY and EUR/TRY rise but domestic costs and prices rise much faster than those of trade partners, the exporter's nominal advantage can erode over time. Conversely, when the lira depreciates in real terms, price competitiveness of Turkish goods against foreign goods may strengthen. But a low REER does not automatically mean high profit; for firms heavily dependent on imported inputs, real depreciation can also raise costs.

REER should therefore be tracked especially for export pricing, capacity expansion, whether to produce in Türkiye or abroad, import substitution, supplier choice and medium-term market strategy. It is not the indicator to use directly for daily cash management or hedging a specific dollar debt.

4. How should they be used in financial management decisions?

In financing decisions, the basic rule is to match debt currency to cash-flow currency where possible. TL-revenue companies borrowing in FX only because rates are lower can see the financing advantage reversed when the lira weakens. Where FX revenue exists, natural hedge, debt maturity and timing of revenues should be assessed together.

In working-capital management, a weaker lira ties up more TL to hold the same physical stock, especially for importers. Maturity structure of FX trade receivables and payables can also amplify FX risk. The 13-week rolling cash budget and monthly liquidity projections should therefore be tested under different FX scenarios.

In pricing, the company should not mechanically pass every rate move into sales prices but should weigh import-input share, competitors' prices, demand elasticity and the competitiveness signal from REER. The gap between how fast cost increases pass through and how fast prices are updated is a main source of margin risk.

In risk management, open FX positions should be measured by currency and maturity; where appropriate, forwards, futures, options and swaps should limit price, FX and interest risk. The aim is not to forecast the rate but to keep cash flows and debt service within acceptable bounds in adverse scenarios.

USD/TRY, EUR/TRY and REER are complementary indicators answering different questions. USD/TRY and EUR/TRY affect today's contracts, costs, debt and cash flows; REER shows how these nominal moves, together with inflation and trade partners, change the company's competitive position. Sound financial management requires reading all three alongside FX position, import-input share, export structure, debt maturity and pricing power.

Indicator	Core question for the CFO
USD/TRY	How do dollar costs, debt and cash flows affect margin and liquidity?
EUR/TRY	Is there currency and maturity alignment among euro sales, imports and debt?
REER	How does change in the lira's real value affect external competitiveness and medium-term pricing/investment decisions?

The CBRT defines REER as the trade-weighted nominal effective rate adjusted for relative price effects and interprets a rise in the index as real appreciation of the lira.