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.
PATENTS: MediaTek Inc said it would not comment on ongoing legal cases, but does not expect the legal action by Huawei to affect its business operations Smartphone integrated chips designer MediaTek Inc (聯發科) on Friday said that a lawsuit filed by Chinese smartphone brand Huawei Technologies Co (華為) over alleged patent infringements would have little impact on its operations. In an announcement posted on the Taiwan Stock Exchange, MediaTek said that it would not comment on an ongoing legal case. However, the company said that Huawei’s legal action would have little impact on its operations. MediaTek’s statement came after China-based PRIP Research said on Thursday that Huawei filed a lawsuit with a Chinese district court claiming that MediaTek infringed on its patents. The infringement mentioned in the lawsuit likely involved
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Catastrophic computer outages caused by a software update from one company have once again exposed the dangers of global technological dependence on a handful of players, experts said on Friday. A flawed update sent out by the little-known security firm CrowdStrike Holdings Inc brought airlines, TV stations and myriad other aspects of daily life to a standstill. The outages affected companies or individuals that use CrowdStrike on the Microsoft Inc’s Windows platform. When they applied the update, the incompatible software crashed computers into a frozen state known as the “blue screen of death.” “Today CrowdStrike has become a household name, but not in