Pound, Yen Swing In Furious, Erratic Moves In Zero-Liquidity Market
"Merry Christmas, you've been stopped out of your FX trades."
That's the message stop-out Santa sent to currency traders this morning following a session of wild, rollercoaster moves in cable and yen which saw the British and Japanese currencies swing erratically as a handful of algos traded with each other while human were largely away from their desks.
According to Bloomberg, which notes that "the currency market has faced bouts of extreme volatility amid thinned liquidity during holidays in recent times", the pound was quoted by ICAP as falling as much as 1% to 1.282 before recovering to 1.296, while Bloomberg's own FX feed saw GBPUSD tumble as low as 1.2360 and spike as high as 1.3253.
... while the USDJPY plunged as low as 106.50 before rebounding to its Tuesday close.
The handful of traders who were by their machines had no idea what to make of the wild swings: "There’s almost no activity and there is no news trigger," Resona Bank client manager Ryuta Taketomi told Bloomberg, adding that "nobody is trading now" even though clearly someone was.
Similar violent holiday trade moves have been observed previously in semi-lit markets, most notably back in 2014 when moments after the official close of trading for Memorial Day, the future contract exploded higher...
... only to tumble right back.
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