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Lira's Crash surprises Japan's mom-and-pop investors again



(Bloomberg) – The Turkish lira fell 12% against the yen, forcing Japanese investors to liquidate positions in one of their preferred emerging markets for the second time this year.

Much of the Lira Monday's sell-off took place at around 7:20 am in Tokyo, when Japanese margin trading companies typically began shedding loss-making client positions. Net lira-yen long margins rose to their highest level since mid-June last week, according to Tokyo Financial Exchange Inc.

The US triggered a run on port assets on Friday. Yield-hit Japanese retail investors plummeted earlier this year as the yen soared in January during the so-called Asian morning's witchcraft hour against every currency pursued by Bloomberg.

"Margin accounts have recently accumulated Lira yearns," said Toshiya Yamauchi, chief foreign exchange trading manager at Ueda Harlow Ltd. in Tokyo. "Given that the lira is a high-volatility currency, the yen's rise must have resulted in stop losses this morning."

The lira fell to a low of 16.1485 against the yen before depreciating most of its decline. It was down 1.3% at 18:06:80 from 15:18. in Tokyo. The early decline was also confirmed by other currency pairs, with the lira falling 9.9% against the dollar.

Turkey's most actively traded emerging market currency was 1.39 trillion Japanese private investors in July According to the latest data from the Financial Futures Association of Japan, this month's USD 13.2 billion worth of lira yen was traded.

Japan's Margin Trader: Why They Are Relevant to Foreign Exchange Markets

Japanese margin trading companies tend to rate their client positions every day, usually around 7:00 am in Tokyo, and liquidate them when losses reach a certain level , As Japanese retail investors are usually thirsting for yield, they tend to accumulate long positions in risk-weighted assets, exposing them to a sudden increase in the yen, according to a study by the Bank of Japan.

The Turkish central bank began to handle interest-rate hikes last year in July, after President Recep Tayyip Erdogan had replaced the head of the bank because he had not met his expectations for a rate cut. In August last year, the currency lost about a quarter of its value and plunged the economy into the first technical recession in a decade.

(Updates with the last long position in Lira Yen in the second paragraph.)

– With support from Onur Ant.

Contacting reporters on this story: Masaki Kondo in Tokyo at mkondo3 @ bloomberg. net; Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net

Contacting the editors Responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net; Tan Hwee Ann at hatan@bloomberg.net, Shikhar Balwani

For more articles of this type, visit bloomberg.com

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