Algos Boosted The Euro By 1.6% In Mini Flash Crash

While American investors and traders were sleeping, the combination of a rush of computer-generated orders and low liquidity prompted a 1.6 percent spike in the euro.

Coinciding with the start of the Asian trading day, the euro was trading just below $1.05 but quickly soared as high as $1.0653, which forced dealers to cover positions at losses.

According to Bloomberg, the euro wasn't the only major currency to exhibit a sudden move. The Swiss frank similarly spiked higher by 1.6 percent against the dollar and the Japanese yen gained 0.4 percent at the same time.

Within an hour the currencies mostly pared their gains. The euro was higher by around 0.5 percent ahead of Friday's U.S. stock market open. At the same time the Swiss franc was higher by 0.4 percent and the yen erased all of its gains and was lower by 0.3 percent.

The euro/U.S. dollar is the most traded currency pair but the mini-flash crash isn't necessarily reason for concern.

Shigeki Yoshitoshi, head of Japan foreign-exchange and commodities sales at Australia & New Zealand Bank Group told Bloomberg that the markets are extremely thin in the final trading session of 2016. Moreover, the less harsh move in the dollar/yen pair suggests that there isn't a broader shift toward risk aversion.