TRY re-enters the crosshairs.......>

EMERGING MARKETS: TRY re-enters the crosshairs

-The Turkish currency came under further pressure Monday, underperforming wider

EMFX space as US Treasury Secretary Mnuchin stated the US are weighing

additional sanctions on the country in response to their purchase of Russian

S-400 missile systems. USD/TRY broke well above the Friday high on the news,

opening a move on 5.7949, the 100-dma.

-Outside of the TRY, price action elsewhere was more muted. Petro-currencies got

a decent boost from better energy prices (WTI crude futures traded higher by

over 2%), but any positive sentiment toward EMFX was generally countered by

deteriorating US equity markets, which started well but faded into the second

half of the session.

-Reflecting this, EMFX implied vols (3m - 1y) were generally offered (excepting

TRY), but short-end vols remain somewhat elevated. The ECB and Fed meetings due

over the next two weeks will likely continue to support this theme.

-Hungarian inflation data and South African manufacturing production are the

calendar highlights Tuesday.