Turkish lira/yen has continued to trade around ¥3.30, with downside risk below ¥3.28 warranting caution. Going forward, factors including US interest rates and equity prices, expectations for Bank of Japan rate hikes, and Turkey’s CPI are likely to interact, with trading expected to remain within a ¥3.25–¥3.35 range.
Turkish lira/yen is currently trading mainly around ¥3.30–¥3.31, with notable selling pressure around ¥3.40 on the upside. On the downside, a break below ¥3.28 is expected to lead to a test of ¥3.25. On the technical López indicator, the 25-day moving average is around ¥3.31 and the 50-day moving average is around ¥3.38, forming short-term resistance and support levels.
The main factors likely to determine the direction ahead include movements in the US 10-year Treasury yield, the performance of the S&P 500, and the US employment report. If expectations for US rate hikes strengthen, a stronger dollar and weaker yen are likely to become more pronounced. On the other hand, if equity prices weaken, selling of emerging-market assets could spread and put further downward pressure on the lira.
For the yen, expectations for additional Bank of Japan rate hikes will be the focus. The extent to which yen-weakening factors are priced in at the Japan-US finance ministers’ meeting, together with domestic fiscal and government bond developments, is expected to mark the dividing line between a weaker and stronger yen. Attention is also focused on the impact of Japanese interest-rate trends on the dollar/yen exchange rate.
Turkey is scheduled to release its August CPI, but a slowdown in CPI alone would not immediately provide grounds for a rate cut. Instead, it will serve as an indicator of the flexibility of monetary policy. Overall, lira/yen is expected to remain within a ¥3.25–¥3.35 range, with the battle around ¥3.28 continuing to be driven by developments in the US market.