‘Flash crash’ strikes hit currencies as yen surges

Mounting considerations over the well being of the worldwide financial system precipitated dramatic swings in Asian currencies on Thursday, with the Japanese foreign money surging by as a lot as three.7 per cent in opposition to the greenback in skinny vacation commerce.

In distinction, the Australian greenback, seen as a proxy for the Chinese language financial system, slumped to its lowest stage in a decade, falling as a lot as three.5 per cent to $zero.6741 in opposition to the dollar.

“For the Aussie greenback it was a flash crash this morning; for the yen, it’s been the alternative,” mentioned Robert Carnell, chief economist and head of Asia-Pacific analysis at ING.

The volatility was sparked by a warning from Apple that financial weak point in China and lacklustre iPhone upgrades would weigh on its quarterly income for the tip of 2018.

The announcement wiped greater than 7 per cent from the corporate’s shares in after-market buying and selling on Wednesday.

Whereas analysts pointed to different issues with the iPhone along with China as a trigger for its weakening gross sales, Apple’s warning underscores considerations that the world’s second-largest financial system is decelerating, rattling buyers and exacerbating fears of a broader international financial slowdown.

China’s personal manufacturing sector contracted for the primary time in 19 months in December, in line with information printed on Wednesday, within the newest signal that the financial system is coming below stress from weakening home demand and tariffs from the US.

“I believe the yen’s rise in opposition to the greenback was because of persevering with international threat aversion pushing up the Japanese foreign money’s haven attraction, triggering extra algorithmic yen purchase orders which escalated the transfer,” mentioned Koon Chow, macroeconomic and international trade strategist at UBP.

The yen surrendered a few of its positive aspects to commerce at ¥107.39, nonetheless 1.37 per cent stronger in opposition to the dollar, whereas the Aussie greenback pared losses and was buying and selling at zero.6957 in opposition to the US greenback in afternoon buying and selling.

“The half reversal of the transfer is symptomatic of such a programmatic commerce,” mentioned Mr Chow.

Cliff Tan, East Asian head of worldwide markets analysis at MUFG, mentioned that the brand new yr has “began with numerous main indicators seemingly displaying financial weak point world wide”, including that there are “fears of a worldwide recession” over the following couple of years.

“However the foreign money strikes of the previous 12 hours are largely tied to Apple [triggering] numerous fears lurking in numerous asset lessons,” Mr Tan mentioned, including that retail buyers in Japan may need minimize their lengthy US dollar-short yen positions, which might have exacerbated the sharp transfer within the yen.

The market’s going to be very delicate to disappointing information so we expect extra volatility

Tai Hui, chief market strategist at JPMorgan Asset Administration, mentioned the current fall in home costs in Australia and headwinds in opposition to the nation’s export sector are additionally dampening sentiment.

“The market’s going to be very delicate to disappointing information so we expect extra volatility,” he mentioned, referring to Asian equities.

“If the US goes by volatility due to fears of weaker progress and recession, then it’s laborious for Asia to shake that off.”

Apple suppliers throughout Asia noticed their shares tumble on Thursday morning.

In Taiwan, Apple assembler Hon Hai Precision Trade, also called Foxconn, fell as a lot as 1.6 per cent, and chipmaker Taiwan Semiconductor Manufacturing Firm fell as a lot as 2.three per cent. The Taiex index was down zero.7 per cent.

In South Korea, SK Hynix, a provider of reminiscence chips, slipped as a lot as four.three per cent, and Samsung Electronics was down 1.9 per cent. The Kospi index was down zero.four per cent.

Further reporting by Alice Woodhouse in Hong Kong and Michael Hunter in London

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