A Calmer Lira Market

The Turkish lira continues to inch higher after the sell-off in May/June 2006. We note that 1-Year TRY Option Volatility is on the way down again. We suggested the trend was firmly downwards at 18.0%, and volatility is now 16.50%. The next key psychological level on the upside for the lira is TRY1.4000/US$, a break of which could set up a test of two year trendline resistance at TRY1.340/US$. However, taking out this level would require a lot of good political news, and very high levels of capital flows, and at present could well be too great a barrier

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