Yen soars after 'flash crash', China worries

In early Asian trade the dollar tumbled to an intra-day low of 104.96 yen its lowest since March 2018

In early Asian trade the dollar tumbled to an intra-day low of 104.96 yen its lowest since March 2018

Stock markets fell globally as investors digested Apple's (AAPL.O) warning about weak iPhone demand. The news also jolted currency markets.

Earlier, in what some market watchers called a "flash crash", the yen rose as much as 4.4 per cent versus the dollar after a flurry of automated orders triggered a massive move in Asia, where trade was thin with Japanese participants still away for the New Year holiday. The yen was poised for its biggest daily rise in 20 months.

"The time between NY close and Asian open is notoriously thin as it is, and couple that with a Japan holiday and Apple news that smacked the equity and you had a nice recipe for a sharp JPY rally", Brad Bechtel, global head of FX at Jefferies, said in a note.

Weakness in the USA dollar also reflects concerns about the USA economy and a drastic shift in investor expectations for interest rate rises, with many now calling the end of the Federal Reserve's rate-hiking cycle. "The yen is undervalued and can strengthen both if the dollar weakens across the board, but also if our broadly positive view that the global economy will stabilize at potential growth this year proves to be wrong, the Fed pauses and/or we get a risk-off market correction-as we saw at the end of 2018", said Athanasios Vamvakidis, FX strategist at Bank of America Merrill Lynch.

Chipmakers who supply parts to Apple were the worst hit. USA crude CLc1 futures rose 55 cents to $47.09 a barrel, a 1.18 percent gain.

MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.81 percent, while in Europe, the STOXX 600 .STOXX ended down 0.98 percent.

US stock futures pointed to another rough start on Wall Street, with Nasdaq E-mini futures down 2.5 per cent and S&P 500 E-mini futures off 1.6 per cent.

Shares in China and Hong Kong see-sawed between gains and losses as investors waited for Beijing to roll out fresh support measures for the cooling Chinese economy.

While more fiscal and monetary policy support had been expected in coming months on top of modest measures previous year, some analysts wonder if more forceful stimulus will be needed to stabilise the world's second-largest economy. "China trade impasse", said Perez. Weaker-than-expected data out of China, Australia's largest trade partner has taken the shine off the Aussie dollar in recent weeks.

"It certainly looks like another ominous sign", said Juan Perez, senior currency trader at Tempus Inc in Washington, referring to the dip in USA two-year Treasury note yield.

The dollar index .DXY , measuring the greenback against a basket of six other currencies, was last down 0.6 percent.

In the US equity market, the Dow Jones Industrial Average fell 610.35 points, or 2.61 percent, to 22,735.89, the S&P 500 lost 55.63 points, or 2.22 percent, to 2,454.4 and the Nasdaq Composite dropped 184.36 points, or 2.77 percent, to 6,481.58. It closed down by 452.81, or 2.26 percent lower, at 19,561. Germany's 10-year bond yield was most recently at 0.169 per cent, from a low of 0.148 per cent on the day.

Brent crude futures rose $1.11 to settle at $57.06 a barrel, a 1.98 percent gain.

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