GBP/TRY

Currencies // Emerging Markets

• Background

  The UK pound or sterling (GBP) is the currency of the UK and is the world’s oldest currency still in use. It is the fourth most traded currency after the US dollar, yen and euro. It is one of the top five reserve currencies held by central banks around the world. With the breakdown of the Bretton Woods system the pound has floated from 1971 and has depreciated ever since. A flirtation with fixed exchange rates in the late 1980s and early 1990s ended disastrously with the exit from the Exchange Rate Mechanism in 1992, as interest rates soared. The Turkish lira (TRY) is the currency of Turkey and was first introduced in 1844, replacing the kurus as the unit of currency. In late 2003 the Turkish Assembly passed a law that revalued the lira removing six zeros from the standard denomination, and effectively creating a new currency. It was formally introduced on 1 January 2005. The UK is one of the most globalised countries in the world. Its economy is heavily service driven. Over three quarters of the workforce have jobs in the services sector. One of these sectors is the large financial services sector, which has contributed a massive amount of tax revenue to the balance of payments over the past few years. The financial crisis of 2007-2009 has eroded the tax take significantly, adversely impacting the income for the UK government and increasing the national debt. Turkey’s economy is a mix of traditional craftsmanship and modern industries, increasingly dominated by the latter, and spans eastern and western markets. The Türkiye Cumhuriyet Merkez Bankası is the Turkish central bank. It was established in 1932. The responsibilities of the bank are defined in a law accepted in 1970. The basic aim of the bank was to support economic development of the country. Now the primary objective of the Turkish central bank is to achieve and maintain price stability. It can use its discretion on the monetary policy to implement and the monetary policy instruments that it is going to use in order to achieve and maintain price stability.

• Influencing Factors

  Factors affecting the value of the pound are economic indicators including the level of interest rates, trade balance, unemployment, price inflation and GDP. The value of sterling is also affected by the prices of coal and oil and other commodities like aluminium, a key component in the small UK automotive industry, as well as other base metal prices. Factors affecting the value of the lira are economic indicators including the level of interest rates, trade balance, unemployment, price inflation and GDP. The value of Turkey’s currency is also affected by the price fluctuations of coal and oil, Turkey being a net importer of these commodities, as well as other commodities like base metal prices.