The Turkish lira yesterday plunged as much as 12 percent against the yen, forcing Japanese investors to liquidate positions in one of their favorite emerging-market trades for the second time this year.
Much of the lira’s sell-off happened at about 7:20am in Tokyo, when Japanese margin-trading firms typically start closing lossmaking client positions.
Net lira-yen longs held by margin accounts rose last week to the highest level since the middle of June, Tokyo Financial Exchange Inc data showed.
The drop exacerbated after a tit-for-tat exchange of tariffs by China and the US on Friday spurred a rush for haven assets.
Earlier this year, yield-hungry Japanese retail investors were also caught in a flash crash, when the yen in January surged against every currency tracked by Bloomberg during the so-called witching hour of the Asian morning.
“Margin accounts have recently accumulated lira longs,” said Toshiya Yamauchi, chief manager for foreign-exchange margin trading at Ueda Harlow Ltd in Tokyo. “Given the lira’s nature as a high volatility currency, the surge in the yen must have triggered stop-losses this morning.”
The lira plunged to a low of 16.1485 against the yen, before paring most of its slide.
It traded down 1.3 percent at 18.0680 as of 3:18pm in Tokyo.
The early slide was also echoed in other currency pairs, with the lira dropping as much as 9.9 percent against the US dollar.
The Turkish currency was the most actively traded emerging-market currency by Japanese retail investors last month, with ￥1.39 trillion (US$13.2 billion) worth of lira-yen traded that month, according to the latest data from the Financial Futures Association of Japan.
Japanese margin-trading firms tend to evaluate their client positions every day, typically at about 7am in Tokyo and liquidate them if losses reach certain levels.
As Japanese retail investors are typically thirsty for yield, they tend to accumulate long positions in risk assets, leaving them exposed to a sudden rally in the yen, according to a research paper from the Bank of Japan.
The Turkish central bank last month started unwinding last year’s interest-rate hikes, after Turkish President Recep Tayyip Erdogan replaced the bank’s chief for failing to act in line with his expectations for a rate cut.
A run on the lira saw the currency lose about a quarter of its value during August last year, tipping the economy into its first technical recession in a decade.
Malaysia is scrambling to protect its assets as the descendants of the last sultan of the remote Philippine region of Sulu look to enforce a US$15 billion arbitration award in a dispute over a colonial-era land deal. In 1878, two European colonists signed a deal with the sultan for the use of his territory in present-day Malaysia — an agreement that independent Malaysia honored until 2013, paying the monarch’s descendants about US$1,000 per year. Now, 144 years later after the original deal, Malaysia is on the hook for the second-largest arbitration award on record for stopping the payments after a bloody incursion
RECOVERED CONFIDENCE: As market rationality returns, Taiwanese stocks that have lagged behind their US peers might soon catch up, Allianz researchers said Local shares last week defied heavy pressure from China’s military drills in waters around Taiwan, and investors this week are expected to pay attention to earnings results from several tech heavyweights as well as the latest economic data on exports and GDP. The TAIEX closed at 15,036.04 points on Friday, posting a weekly increase of 0.24 percent from 15,000.07 on July 29, Taiwan Stock Exchange data showed. Over the same period, the FTSE TWSE Taiwan 50 Index, which comprises Taiwan’s top 50 stocks in terms of market capitalization, closed up 0.93 percent at 11,750.15 points, while the Formosa Stock Index, which measures
Pharmaceutical start-up AcadeMab Biomedical Inc (研生生醫) said it has been developing a COVID-19 antibody drug, an endeavor not being undertaken by many other Taiwanese pharmaceutical firms. The company was spun off from Academia Sinica’s Institute of Cellular and Organismic Biology in 2020 and has only 16 employees. It has set its sights on the innovative field of the monoclonal antibody treatment of tumors. The start-up began developing antibody drugs in January, after seeing that COVID-19 vaccines could not effectively protect people from new variants of SARS-CoV-2, AcadeMab Biomedical chief strategy officer Pearl Fong (俸清珠) said in an interview with the Taipei Times
FORECAST EXCEEDED: China’s curbs on some Taiwanese goods are unlikely to affect trade given inter-reliance in the electronics industries, a finance ministry official said Exports last month spiked 14.2 percent to US$43.32 billion, the second-highest increase on record and the 25th consecutive month of gains, driven by global demand for electronics used in high-performance computing and vehicles, the Ministry of Finance said yesterday. The ministry expects the trend to sustain this month and beyond, although the pace could slow due to inventory corrections for laptops, smartphones and other consumer electronics. “The July results proved stronger than expected despite rising fears over economic uncertainty,” Department of Statistics Director-General Beatrice Tsai (蔡美娜) said, adding that a high sales season in the West and stabilized COVID-19 infections in China