In what some have suggested is a chained liquidation stemming from the collapse of AAPL shares after-hours, multiple FX pairs are flash-crashing across the globe amid still low liquidity conditions in what appears to have been the unwind of a pair trade where an AAPL long was "hedged" with a basket of FX carry longs.
A good example of risk associated with foreign trade, the currency exchanges are generally innovative, unpredictable. So a foreign investor can buy currency insurance, literally, from his broker in the form of a counter investment to recover losses from unexpected exchange changes. In this case, Apple, a very large share of the US stock market, changed valuation, suddenly. That has an effect on money flows and hedges get activated.
Foreign investors who fund all that government debt need this insurance, and the yield on treasuries has to be high enough to justify the insurance premium. That is negative feedback, our ability to pay interest charges drops, money flows slows, rates jump, we contract, suddenly, a requant. Bailout jubilee.
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