Turkish Lira/Yen Pair Sees Rangebound Pattern Ahead of Key CPI Release

The Turkish lira/yen pair is expected to trade in a rangebound pattern between 3.25 and 3.36 yen per lira during the week starting August 18, with little clear directional bias anticipated.

The effective interest rate near 40% and recovering foreign exchange reserves are supporting the downside, while speculation about monetary policy 'normalization,' higher crude oil prices, and expectations of an additional Bank of Japan rate hike are capping the upside.

Movements in the yen also play a role, with market expectations that the Bank of Japan could move toward an additional rate hike as early as September strengthening. The July national Consumer Price Index (CPI) release on August 21 is key to watch, as an upside surprise would reinforce expectations of a September BOJ rate hike and could push the Turkish lira/yen pair lower through yen appreciation.