MARKET OVERVIEW - It is unlikely that interest in carry trade for the lira will be as intense as it has been in the last 18 months.

Foreks - ING reported last week that they observed highly irregular selling in the Turkish lira, the world's most sought-after carry trade. "According to estimates, $20 billion of foreign currency invested in carry trade exited the lira, and before Turkish authorities could regain control of the market, the USD/TRY exchange rate briefly surged by 10-12%," they stated.

ING noted that the Central Bank has been actively intervening in the foreign exchange market to support the lira, utilizing TL liquidity withdrawal operations and directing borrowers toward overnight lending facilities, which were increased by 200 basis points to 46%. Although one-month TL implied yields, which surged to 75% at the end of last week, have now fallen to 48%, they remain far from the 35% levels seen earlier. Economist Chris Turner remarked, "The selling of the lira was a shock to the market, and while the Central Bank seems to have regained control over USD/TRY, renewed interest in carry trade is unlikely to be as intense as it was in the last 18 months."