A mundane afternoon market was suddenly transformed into a cascading dollar collapse today when within the space of two minutes the U.S. currency crashed against most of its major trading partners. From 12.15 pm to 12:17 pm in New York the dollar lost 19 points against the euro, 51 versus the yen, 20 against the sterling, 40 against the Australian dollar and the dollar index (DXY) shed 14 points.
The perfect coincidence of the events, beginning and subsiding at exactly the same time, made it unlikely that the various currencies were responding to a provocation from within a specific currency but that all the pairs were answering a catalyst from outside the spot market.
Two sources identified the culprit as the CME Yen futures contract (JYU4) which, depending on the story saw a huge 25,000 contract execution of about $3 billion notional value, (zerohedge 12.21 pm, http://bit.ly/1pbga7d) or a mistaken 'fat finger' trade of 27,000 contracts (Market News International, 12:53 pm) which drove reactive dollar selling across the market. Since none of the pairs subsequently regained their previous levels and the biggest decline was in the dollar/yen, an execution rather than a mistake is the more plausible explanation.
Chief Market Strategist
WorldWideMarkets Online Trading