Flash Crash Hits Turkish lira, plummeting 15% in seconds

The Turkish lira fell more than one percent against the U.S. dollar on Monday and fell to as low as 6.38  to the dollar in early Asia trading.

Market watchers described lira’s sudden weakening as a “flash crash” as Japanese investors cut risky assets over China-U.S. trade war concerns.

The lira stood at 5.8160 against the dollar at 0628 GMT, weakening from a close of 5.7540 on Friday, Reuters reported.

The Turkish currency has lost almost 50 percent of its value against the greenback since last August due to tensions between the Turkey and U.S.  over S-400 Russian missile and protests in Hong Kong. The Sino-U.S. trade war has also negatively impacted the lira.

Reuters mentioned that on Friday U.S. President Donald Trump announced an additional duty on some $550 billion of targeted Chinese goods.  China retaliated to Trump’s decision by unveiling tariffs on $75 billion worth of U.S. goods just after Washington’s decision.

The China-U.S. tensions have had a devastating impact on Asian shares on Monday and have shaken confidence in the world economy, including Turkey.

“The brief plunge in thin overnight yen/lira trading was reminiscent of another “flash crash” on Jan. 3 when Turkey’s currency weakened to a similar level due to a global market sell-off and flight from risk triggered by concerns about slowing economic growth,” Reuters reported.

Bloomberg also mentioned that the Turkish lira plunged as much as 12% against the yen, forcing Japanese investors to liquidate positions in one of their favorite emerging-market trades for the second time this year.

According to the Financial Futures Association of Japan, the Turkish currency was the most actively-traded emerging-market currency by Japanese retail investors in July, with 1.39 trillion yen ($13.2 billion) worth of lira-yen traded that month.

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