You will always get a better exchange rate in Turkey than you do in the UK. Having said that, the exchange rate is particularly good at the moment, higher than it's been for years. I only wish I knew what it was going to do in the next few months!!
Euros and GBP will be accepted at most places - apart from the smaller shops where it will be handy for you to have TL.
Top questions answers most of this.
But it is best to change pounds to lira and use lira in the resort, either at the exchange place near the post office or the bank. Good exchange rate at the moment. If you use sterling or euro in shops and restaurants the exchange rate is whatever the retailer decides, so i recommend lira
Yes definately a better rate in the resort.
As for paying for goods, well it depends on what you are buying.
I have been coming to Kusadasi for 20 years, and live here now also....
I have always found that you can negotiate better paying in sterling, as the shop keepers then hold onto that money to get a better rate at some point.
I am talking about leather or gold etc, or a decent amount of goods purchased... not on a pack of ciggies or a few cd's.
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