Lira Strengthens To Pre-Summer 2006 Levels

Having broken through resistance at TRY1.3700/US$ on April 3, the Turkish lira continues to strengthen against the dollar, at one point trading at TRY/1.3380US$ on April 18. Since falling to TRY1.4625/US$ in the early March EM sell-off, the lira has gained an impressive 8.5% against the greenback and has pushed to within 2.9% of our TRY1.3000/US$ target, first set in August 2005. Carry trade remains a big part of this story. With the key policy rate unlikely to fall below 15.50% in 2007, the yield spread over key global currencies including the euro, pound and dollar, let alone the traditional

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