Hayes Warns Crypto Traders of EUR/JPY 'Smoke Alarm' and Dormant Fed Channels

Arthur Hayes has raised an alarm for crypto traders in the form of the EUR/JPY currency pair. This pair has started to fall, but a more telling indicator would be if it drops to 140 yen per euro by June 2027, which would signal increased dollar liquidity. However, the current reading is still 29.4% above this threshold.

The European Central Bank's reference rate for EUR/JPY fell from 185.63 yen per euro on September 1 to 181.21 on September 3, a decline of 2.38%. Hayes believes that if this pair falls further, it would indicate stress in the sovereign and dollar repo markets.

Hayes also pointed out that the Federal Reserve's channels for providing emergency dollars are still dormant. The FIMA repo facility allows approved foreign monetary authorities to raise dollars temporarily against Treasuries, but the current outstanding balance is zero, and there has been no recent use of this facility.