Foreign exchange seasonality: The probability of a stronger yen in August is high, and high-beta currencies are under pressure (Deutsche Bank)
Deutsche Bank reported that there were significant seasonal patterns in the foreign exchange market in August: the Japanese yen was the strongest performing currency, appreciating against both G10 and emerging market currencies; while high beta, commodities an
Deutsche Bank reported that there were significant seasonal patterns in the foreign exchange market in August: the Japanese yen was the strongest performing currency, appreciating against both G10 and emerging market currencies; while high beta, commodities and carry currencies generally performed poorly. This means that based on historical patterns, August is a month that favors safe-haven and low-risk currencies. The market has a general understanding of this seasonal pattern, but may have underestimated its intensity. Price movements are concentrated during the London-New York trading session and are associated with risk-averse behavior. The report suggested that the South African rand was the weakest performing currency in August. One-sentence conclusion: The foreign exchange market in August routinely favors safe-haven assets such as the Japanese yen, which is a seasonal headwind period for high-beta and emerging market currencies. Trading should comply with this law. Positive/negative: Positive for the Japanese yen and safe-haven assets; negative for high-beta and commodity currencies such as the New Zealand dollar, South African rand, and Australian dollar. The market has a general understanding of this, but it is still an important basis for tactical allocation. Catalyst: This report is a seasonal analysis without specific catalysts. It can be used as a trading reference to start layout in late July and early August each year.