(Reuters) - The yen soared to a record high against the dollar on Thursday in chaotic trading as a break of the previous peak triggered a host of stop-loss and option-related selling, which in turn caused a cascade of algorithmic sales.
While the escalating nuclear crisis and subsequent rush for safety was the initial spur for the move, this latest lunge higher in the yen was more about positioning.
All sorts of exotic option and structured products were being stopped-out, while many Japanese margin traders were forced to bail from leveraged trades funded in yen.
Dealers said the market was increasingly disorderly with liquidity evaporating and bids pulled, leaving huge gaps in the charts. Many were actively hoping the Japanese authorities would intervene to provide some liquidity and restore order. Click to read more.
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