Our baseline forecast is that the Turkish lira will average around TL1.60:US$1 and TL2:EUR1 in 2011-15, despite substantial volatility. Global liquidity is expected to tightened only gradually during the forecast period, which should ensure adequate capital inflows into lira-denominated assets to support the exchange rate. We see a moderately high risk of a much weaker lira, especially if global risk aversion increases sharply, making it difficult for Turkey to meet its large external financing needs.