Our baseline forecast is that the lira will average around TL1.60:US$1 and TL2:EUR1 in 2011-15, having depreciated moderately in late 2010 and early 2011. Global liquidity is expected to remain loose for most of the forecast period as a result of quantitative easing in the US and loose monetary policy in the euro area, which should ensure adequate capital inflows into Turkish-lira denominated assets to support the exchange rate. That said, our stable annual average forecasts mask our expectation that there will continue to be strong bouts of exchange rate volatility during the forecast period. 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.