The lira has proved quite resilient since the sharp falls in late 2008 and early 2009, but bouts of volatility in the global foreign-exchange markets owing to shifting risk perceptions have caused fluctuations that are likely to continue, especially if the euro area crisis deepens further. Given the prospect of strong capital inflows as a result of another period of quantitative easing in the US, loose monetary policy in the euro area and the Turkish government's current position that it will not introduce capital restrictions, our baseline forecast is that the lira will remain relatively stable against the dollar at around TL1.50-1.60:US$1 in 2011-15. Against the euro, which is forecast to depreciate against the dollar, the lira is expected to appreciate from an estimated average of TL1.98:EUR1 in 2010 to an average of about TL1.85-1.90:EUR1 in 2011-15. However, the Turkish lira has appreciated substantially in real terms, raising concern that there may be a sharp downward adjustment if the international financial situation does not prove buoyant enough to tolerate the country's persistently large current-account deficits.