We initiated our long TRY/ZAR recommendation on 23June with spot at 68, arguingthat TRYZAR should appreciate on policy differentials. Since then therecommendation with carry returned 4.1%. We recommend halving positioning andwaiting for better entry levels.    We still expect TRY/ZAR to appreciate, though we think the pace of the appreciationcould be reversed temporarily as upward momentum seems to have been lost.    We think that a move higher will be further challenged by South Africa’s coming CPIinflation release and the steepness of the curve. In addition, we believe the marketwas positioned long USDZAR ahead of the no-confidence motion on 8August, helpingto avoid a sharp drawdown.    We close USD 5mn of the USD 10mn original position for a 4.1% profit (USD 206k).

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