The Turkish currency had slumped more than seven per cent against the yen since the end of November to 2 January.
Monday 07, January 2019
(Bloomberg) --Retail investors in Japan slashed their net long positions in the Turkish lira on Thursday, according to data from a trading platform, offering a clue to the mystery behind the flash crash that had sent the yen soaring against every currency in the world.
Individual investors cut their net lira long positions by 43 thousand contracts on Thursday, the most since August, according to data from the Tokyo Financial Exchange. The contracts were worth TRL 427 million lira ($80.1 million), though it’s unclear whether the sales sparked the lira’s decline of as much as 9.2 per cent against the yen, or happened after the wild gyrations triggered loss-covering.
“Liquidity issues likely played a role, but the underlying drivers were fundamental,” according to a 5 January note by analysts at Goldman Sachs Group. “We think the dollar-yen flash crash and its aftermath show that the market is going through a bumpy adjustment to new demand dynamics.”