Update: as fast as it came, the lira flash crash is over, with the currency trading down just 1.5% vs the dollar, surging from a flash crash of 15% just a few minutes earlier.
However, with all pre-existing longs now stopped out, we expect that the kneejerk rebound will fade shortly and the currency will resume drifting lower. That said, for those who bought at the lows, congratulations.
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The Sunday session already had a flash crashy feel to it, when the first casualty as said "feel" became reality was the Turkish Lira, which suddenly snapped, plunging as much as 15% (yes, fifteen percent) against the dollar in a matter of seconds, tumbling to the lowest level since August 2018.
There was no news - besides the already tense sentiment that had ravaged trader nerves on Sunday afternoon and dragged futures sharply lower - so it was either a fat finger or a macro fund getting stopped out at a huge loss.
One possible reason for the lira weakness: China, which we learned recently, had been supporting Turkish reserves with $1BN in swaps, may will no longer backstop the NATO member. However, that is pure speculation and the reason may simply be Mrs Watanabe, whose stops have a legendary ability of getting steamrolled every time there is macro tremors.
More if we see it, but for now keep an eye on the yuan, which is also tumbling if not nearly as fast as the Lira. We expect a response from the US Treasury imminently, as Trump orders Mnuchin to intervene directly and start buying up billions of the the Chinese currency.