Hedging the Turkish lira: when a forward costs over a third a year

Turkey is an important trading partner of the European Union, and many French companies sell or buy there. The Turkish lira poses a problem the major currencies do not: its depreciation is strong and persistent, and so is the cost of hedging it.

Five years of depreciation

A receivable of one million Turkish lira was worth about EUR 93,300 in October 2021, and about EUR 17,900 in October 2026. The lira's most favourable point in the period was the very first day: the decline was almost continuous.

Why the forward is so expensive

The forward rate reflects the interest-rate gap between the two currencies. With lira rates several tens of points above euro rates, the EUR/TRY forward trades far above spot.

Not hedging is not a saving

Faced with such a cost, the temptation is not to hedge. It is a bet: it amounts to wagering that the lira will lose less value than the forward already builds in. The forward is not a forecast — it stems from the rate gap, which notably reflects the level of inflation in Turkey. Not hedging does not remove that cost; it replaces it with uncertainty.

Over the last five years, the lira has lost more than 80% of its value against the euro. Nothing says the future will look like the past, but a company that leaves lira receivables unhedged must know the environment in which it does so.

Alternatives to a standard hedge

1. 1
   Invoice in euros

   The simplest protection: the FX risk moves to the Turkish customer. It requires the customer to accept, and to be able to obtain euros.

2. 2
   Shorten payment terms

   The forward cost grows with time: on 16 October 2026, about 8% at three months against nearly 36% at one year on EUR/TRY.

3. 3
   Revise prices more often

   A clause indexing prices to the exchange rate, or frequently revised price lists, shift part of the risk onto the selling price.

4. 4
   Balance purchases and sales

   Purchases in Turkish lira naturally offset sales in lira: only the difference needs hedging.

Sources

• European Central Bank, euro reference exchange rates (EXR series), from 15 October 2021 to 16 October 2026; extremes calculated by ELEGG.
• Forward points and spot rates captured by ELEGG Finance on 16 October 2026 at 22:17 UTC (source: NetDania), mid rates between bid and offer; ELEGG calculation. USD/TRY and EUR/USD forward points; USD/TRY spot rate from the snapshot's fallback source.