Iran Headlines Lead Algorithms to Make Money-Losing Trades
Iran Headlines Lead Algorithms to Make Currency Trades Resulting in Losses
(Bloomberg) -- Algorithmic trading machines jumped on headlines with the words “Iran” and “attack” in them, exacerbating sharp moves in key currency pairs during early Asian trading, according to traders.
Headlines saying Iran launched missiles against U.S.-Iraqi bases were seized upon by algo programs that unleashed a wave of dollar-yen sell orders, according to Asia-based traders who asked not be named as they are not authorized to speak publicly.
The move, starting just after 8:20 a.m. in Tokyo, was so quick that some traders who had started the session with a short position in dollar-yen at 108.45 ended up being long after algos from around the world hit their bids, they said.
As the currency pair dropped as much as 0.7% to 107.65, these traders ended up with more and more dollars. Algos also sold the Australian and New Zealand dollars as markets were swept up in a wave of risk aversion.
Just slightly after two hours, the wave of haven trades that had swept through stocks, Treasuries and currencies were quickly pared.
Iranian Foreign Minister Javad Zarif said the nation had “concluded the proportionate measures in self defense,” indicating there won’t be an immediate escalation in the conflict with America.
Dollar-yen unwound its earlier move to be little changed at 108.46 as of 8:54 a.m. in London. The Aussie was up 0.1% and the kiwi was 0.3% stronger after both had earlier fallen at least 0.3%.
To contact the reporter on this story: Michael G. Wilson in Sydney at mwilson176@bloomberg.net
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Liau Y-Sing, Nicholas Reynolds
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