In what some have suggested is a chained liquidation stemming from the collapse of AAPL shares after-hours, multiple FX pairs are flash-crashing across the globe amid still low liquidity conditions in what appears to have been the unwind of a pair trade where an AAPL long was "hedged" with a basket of FX carry longs.
USDJPY just flash-crashed a stunning 4 handles (the biggest drop since 2009 according to Reuters) to its lowest in over two years, as the JPY was suddenly panic bid against the USD, as the pair tumbled from 109 to as low as 104.87.
Pushing JPY to its strongest against the USD since Nov 2016...
In addition to JPY, AUD also crashed...
Sending AUDJPY to its lowest since 2009...
And TRY plunged, as the stench of a major carry trade unwind hits.
Meanwhile in China, the offshore yuan tumbled.
And so did Cable.
"“The Apple news is driving safe haven flows, which have seemingly triggered a flash crash in FX," Brad Bechtel, global head of FX at Jefferies told Bloomberg.
Reuters are reporting this as the biggest FX moves since 2009. Obviously exacerbated by this being the worst period for FX liquidity, but still "probably just a little glitch" as the US president would call it.
While there was no clear catalyst behidn the move, Ray Attrill, head of FX strategy at National Australia Bank Japanese said that retail investors may be behind the sharp currency swings: "AUD/JPY is one of the more active pairs traded by Japanese retail. Algorithms would probably have then got involved after the initial run, I’d imagine."
Also keep in mind that Japan remains closed for the rest of the week, adding to the illiquidity of the market; even so it may be prudent for the BOJ to say something in light of these sharp moves.
Notably, the multiple flash crashed occurred while FX futures were closed suggesting it is cash market driven rather than exchange margin calls.
Though they quickly caught on once they reopened...
And speaking of a BOJ verbal intervention, Deutsche Bank's Alan Ruskin writes that "this is the type of market dislocation that fits perfectly with excessive market volatility, and the BOJ can easily justify some short-term intervention to stabilize the FX market."
Meanwhile, the sharp moves have prompted contagious buying in safe havens as gold spiked.
And US Treasury yields tumbled.