Was that a 'fat finger' trade in dollar-yen?

Traders work on the floor of the New York Stock Exchange in New York.
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Traders work on the floor of the New York Stock Exchange in New York.

All of a sudden, during a quiet August trading afternoon, there was a momentary flash of excitement in the currency market.

Within seconds, dollar-yen plunged a half percent. The move also happened across other pairs traded against the dollar, all of them strengthening sharply against the U.S. currency. For instance, there was a mirror image move in Australia's dollar versus the U.S. dollar.

Fat finger? Bad trade? Nervous headline?

It's all just speculation.

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At several desks, traders jumped on the "fat finger" theory. "Noise that 27K yen contracts were traded in a very short period, suggesting strongly of a fat finger event," said one trader.

A "Mixture of fat finger and big flow in a period of low liquidity," said Steven Englander, head of FX strategy for Citigroup. "Markets are still a bit nervous." But what the catalyst might have been for that trade was unclear, and only half of the move actually reversed.

Art Cashin, UBS' director of floor operations at the New York Stock Exchange, wrote that "traders are a little skittish" and that the move in dollar-yen was "followed by a strange tick in gold ... on alert for glitches."

The fact that the move is broad based and showed up in other assets and pairs could mean dollar stop orders were triggered. That occurs when a set price target is reached that triggers buying or selling.

After all, fat finger trades are different in stocks and foreign exchange, where $5 trillion changes hands daily.

"We don't tend to see fat finger trades in FX the same way as in the equity space, as it take a really fat finger to move a currency," Jens Nordvig, head of fixed income research Americas and global head of currency strategy at Nomura.

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The bottom line: traders everywhere are on high alert given the pullback in equities and risk aversion driven by skittishness about an escalation in tensions between Russia and Ukraine and Russia and the West.

When the yen strengthens, people take note. It's one of the favorite safe places investors hide during turbulent times, and if there is one thing that is certain, these are turbulent times.

Volatility is making a comeback.

—By CNBC's Sara Eisen