You may recall the early new year flash crash in USD/JPY, which of course spread to other currencies.
It was quite the chaos there for those few minutes.
Well, with Japan about to take a 10 day holiday, closing Japanese markets and removing the circa 400bn USD of forex volume that trade in Tokyo on an average day, there are, probably quite reasonably, fears of another.
Warnings of low liquidity volatility have been issued:
Reports Bloomberg:
- Japan's retail investors have set net long yen positions against the dollar to near a record
- "Memories of the January episode are the reason behind the increase in short dollar-yen positions, given also the wariness over U.S.-Japan trade talks," said Yoshihiko Kobayashi, president of JFX Corp., a Tokyo-based margin trading firm.
Margin FX day traders in Japan, also known as Mrs. Watanabe, have grown in recent years as the central bank expanded quantitative easing, spurring retail demand for high-yielding currencies.
- Speculators have occasionally sought to trigger off a chain reaction by buying the yen in times of low market liquidity in the hope of setting off stop-loss orders from margin traders.
- While platforms such as those provided by the Tokyo Financial Exchange and Gaitame.com Co. will remain open during the Golden Week, the absence of most Japanese market participants would take out a large chunk from Asia's daily turnover.
Heads up ladies and gentlemen!
