Following the market tumult Friday,....>

TURKISH LIRA: Following the market tumult Friday, which saw USD/TRY rally as

much as 7% on an intraday basis, the Monday session has been somewhat calmer,

but USD/TRY remains highly volatile. The decision by the Turkish central bank to

suspend their one-week repo operations (and force banks to use funding windows

with far higher lending rates) remains a market focus and has helped prompt

USD/TRY overnight forward implied yield rates to record highs. Further market

instability may force the bank's hand further toward their benchmark rate policy

as it did in September, when the bank raised rates by 625bps.

-The TRY has clawed back a modicum of strength Monday, heading back below the

5.60 mark and gravitating once again to the 200-dma at 5.4716, but implied vols

remain perilously high: one-week vols sit at 35 vol points and the highest since

the full blown currency crisis in August last year.

-Reassurances from the Turkish central bank that they are to re-build their FX

reserves (also attributing the decline to debt repayments and state energy firm

payments) and threats from the country's authorities to investigate foreign

banks that are short TRY will have helped also.