Morgan Stanley entered a short.........>

TURKISH LIRA: Morgan Stanley entered a short USDTRY position at Thursday's NY

close, with a target of 3.85 and a stop at 4.15. The cross is trading at 4.0420

last.

- Morgan Stanley believe that the "early elections called by President Erdogan

will be positive for TRY. Investors are concerned that the fast credit expansion

would continue ahead of the elections and could lead to higher inflation and

wider current account deficit. We don't disagree, but we believe the CBT could

tighten its monetary policy to support the currency, which is important for

voters. Our economist believes the CBT could tighten its monetary policy by

hiking the blended funding rate by 75bp and the late liquidity window somewhere

around 16%. This would send a strong signal to the market that it has the

flexibility to fund the market at a much higher rate if needed, which would help

TRY rally, in our view. Lastly, positioning in TRY is light. Our tracker of

GBI-EM investors' positioning shows that investors are UW TRY vs the history

since late 2016. The risk to the trade is under-delivery by the CBT."