SYDNEY (Reuters) - The Japanese yen soared in early Asian trading on Thursday as the break of key technical levels triggered massive stop-loss sales of the U.S. and Australian dollars in very thin markets.
The dollar collapsed to as low as 105.25 yen on Reuters dealing JPY=D3, a drop of 3.2 percent from the opening 108.76 and the lowest reading since March 2018. It was last trading around 107.50 yen.
Analysts said the rot began when tech bellwether Apple Inc (AAPL.O) shocked investors by cutting its earnings guidance, citing sluggish iPhone sales in China.
The news sent U.S. stock futures sliding and sparked a rush of funds to safe-haven bonds.
With risk aversion high, the safe-haven yen was propelled through major technical levels and triggered massive stop-loss flows from investors who have been short of the yen for months.
The move was exacerbated by a dearth of liquidity, with Japan still on holiday after the New Year, and by automated algorithmic trades which are carried out by computers in micro seconds.
Most major currencies simply collapsed against the yen in a matter of seconds.
“Looks like we had a flash crash,” said Ray Attrill, head of FX strategy at National Australia Bank.
“One theory is that may be Japanese retail FX players are forcing out of AUDJPY which is creating a liquidity vacuum,” he added. “This is a market dislocation rather than a fundamental event.”
The Australian dollar tumbled to as low as 72.26 yen AUDJPY=D3 on Reuters dealing, a level not seen since late 2011, having started around 75.21. It was last changing hands at 73.72 yen.
The Aussie in turn sank against the U.S. dollar to as far as $0.6715 AUD=D3, the lowest since March 2009, having started around $0.6984. It was last trading at $0.6888.
Other currencies smashed against the yen included the euro, sterling and the Turkish lira.
Reporting by Wayne Cole; Editing by Richard Pullin and Sam Holmes