Later On

A blog written for those whose interests more or less match mine.

What about the flash-crash of the dollar on Wednesday?

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Pam Martens writes at Wall Street on Parade:

One would think we had asked for missile launch codes when we reached out to the futures exchanges to find out what caused the precipitous plunge in the U.S. Dollar’s futures contract at 4:04 P.M. Wednesday afternoon – long after the Federal Reserve’s market moving news had been digested by traders.

If currencies are now the new weapons of mass destruction – maybe we were asking for the equivalent of missile launch codes.

Our curiosity was piqued when the intrepid Eric Hunsader of market data firm, Nanex,published amazing charts showing a precipitous plunge in the U.S. Dollar just after the equity markets had closed in New York. Hunsader wrote:

“On March 18, 2015 between 4:02 and 4:09 PM Eastern Daylight Time, the U.S. Dollar flash crashed, losing over 3% of its value in just under 4 minutes, then gaining most of it back over the next 3 minutes.”

If that isn’t a Flash Crash, I don’t know what is. (Both Wall Street On Parade and Hunsader know a thing or two about Flash Crashes.) But no mainstream business media reported the event as a Flash Crash or even alluded to the 4-minute bungee jump and retracement in any  explicit terms.

The Wall Street Journal reported the next morning that “For a few minutes on Wednesday, the lack of dollar buyers caused a short-term freeze in electronic trading platforms, according to a New York-based trader at a major currency-dealing bank. ‘There was a lot of shouting on the desk, a lot of nervousness,’ the trader said…”

This morning, the Wall Street Journal is using stronger language, calling it a “wild ride” in currencies on Wednesday and quoting a currency trader who said it “was like a zoo,” with traders “struggling to fill orders” and “screaming and yelling for the fill.” (The “fill” means to have their currency order “filled,” that is, the transaction completed.)

One business writer who did quickly capture the magnitude of the plunge was Barron’s Chris Dieterich, who reported at 4:26 P.M. on Wednesday that the dollar “was down a whopping 3.6% versus the euro in recent trading, according to FactSet.”

There is no question that there is an extremely crowded trade in bullish bets on the U.S. Dollar by hedge funds around the world. In just the past year, the U.S. Dollar has gained 29 percent against the Euro on talk from the Fed of a strengthening U.S. economy and plans for an interest rate hike. But what made this move unusual was that the plunge didn’t happen right after the Fed’s FOMC statement release at 2 P.M., alluding to the potential for a delayed hike in interest rates, or during Fed Chair Janet Yellen’s press conference at 2:30 P.M. It happened at 4:04 P.M. Eastern time.

We went to the source for clarification: the CME and ICE exchanges which trade currency futures. A courteous spokesperson for CME told us the following via email: . . .

Continue reading.

Written by LeisureGuy

20 March 2015 at 4:09 pm

Posted in Business, Technology

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