(Bloomberg) – The Turkish pound is down 12% against the yen, forcing Japanese investors to close positions in one of their favorite emerging markets deals for the second time this year.
Much of the Lira The Monday sale happened around 7:20 a.m. in Tokyo, when Japanese margin trading companies typically begin to close losing positions. Net lira-yen holdings in margin accounts rose last week to their highest level since mid-June, according to Tokyo Financial Exchange Inc.
"Margin accounts have recently accumulated. the pound is longing, "said Toshiya Yamauchi, Chief Currency Trading Manager at Ueda Harlow Ltd. in Tokyo. "Given the nature of the pound as a highly volatile currency, the jump in the yen must have caused a stop-loss this morning."
The pound collapsed to a level of 16.1485 against the yen before dividing most of its sliding your. It was trading 1.3% to 18.0680 as of 3:18 pm in Tokyo. The early slide was sounded in other currency pairs as well, with the pound falling as much as 9.9% against the dollar.
Turkish currency was the most actively traded currency in emerging markets by Japanese retail investors in July, with 1.39 trillion yen ($ 13.2 billion) lira-yen traded this month, according to recent Association data of Japan's financial futures.
Japanese margin traders: why they matter to forex markets
Japanese margin traders tend to evaluate their client positions every day, usually around 7am in Tokyo and liquidate them if losses reach certain levels. Because Japanese retail investors are usually thirsty for profitability, they tend to accumulate long positions in risky assets, leaving them exposed to a sudden rally in the yen, according to a Bank of Japan research paper.
The Central Bank of Turkey began to halt last year's interest rate hikes in July after President Recep Tayyip Erdogan replaced the bank's chief as he did not act in line with his expectation of interest cuts. The run of the pound saw the currency lose about a quarter of its value last August, turning the economy toward its first technical recession in a decade.
(Updated with latest long lira-yen position in the second paragraph.)
– Supported by Onur Ant.
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