Beware of currency flash-crashes during Japan’s witching hour
Last week’s yen-driven crash sent emerging-market currencies, including the rand, reeling — and more long weekends could mean more of them
Singapore — If once is an accident and twice a coincidence, traders looking for a third currency flash-crash are surely poring over Japan’s holiday calendar by now, bracing for enemy action. Last week’s yen-driven crash that sent the Turkish lira into a tailspin and a sudden plunge in the rand in January 2016 had three things in common: they happened in the so-called early Asian witching hour; during an extended Japanese holiday; and involved elevated long positions from retail investors in under-pressure, high-yielding currencies.
With nine more extended holidays coming in 2019, taking account of weekends, speculators may be readying for a further attack on Japanese retail positions, should a similar opportunity arise, according to market participants. The next holiday up is on January 14...
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