Currency Liquidity Vanishes on Mounting Fears of London Hub Slamming Shut
- Prospect of U.K. capital lockdown adds to market strain
- Traders unwilling to take positions against surging dollar
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Liquidity evaporated in the $6.6 trillion-a-day currency market as few traders wanted to take positions against a surging dollar ahead of a potential lockdown in the biggest trading hub for foreign exchange.
The pound on Wednesday sank as much as 5% to its lowest since 1985 and Norway’s krone plummeted more than 13% to a record low, moves akin to so-called flash crashes. A gauge of the dollar hit a record high as the U.S. currency outstripped all of its Group-of-10 peers Wednesday. With U.K. Prime Minister Boris Johnson increasing restrictions on the population and not ruling out tighter controls on financial center London, market makers are disappearing and moves appear to be spinning out of control.