USD/TRY hit a new record high in early Europe, TRY puts value at 7-year high

• Markets continue to sell Turkish Lira (TRY) on US-Turkey tensions.
• USD/TRY hit a record high of 5.75.
• The relentless TRY selling has pushed the value of Lira put options (bearish bets) to a 7-year high.

The USD/TRY pair has hit a new record high of 5.75 today, beating the previous high of 5.56 set yesterday.

Turkey's currency has dropped close to 10 percent this week alone and looks set to extend the losses further as Turkey's credit default swaps and the government bond yields are trading at multi-year highs.

Further, the one-month 25 delta USD/TRY risk reversals have jumped to 4.75, the highest level since 2011, meaning the implied volatility premium for the TRY puts is at its highest in seven years.

The sell-off in the Lira could be associated with the escalating tensions between the US and Turkey.  

US President Donald Trump has already imposed sanctions on two Turkish officials, according to Reuters News. And now investors are worried that President may impose more sanctions as the Turkish delegation sent to the US this week failed to settle the dispute.