A Yen for an August Rally
The yen typically strengthens in August, but 2012 is different — so far.
Another August, another month for a yen rally — or so say the historical statistics. Whether it is from repatriation flows or something else, the yen tends to strengthen in August.
Just not in 2012.
"JPY’s strong seasonal tendency to rally in August has not played out yet and JPY is little changed month-to-date against both USD and EUR," says Adam Cole, head of foreign-exchange strategy at RBC Capital Markets.
That could change, Cole says. "With a heavy concentration of UST coupon payments this week," he wrote in a note to clients, "repatriation flow is likely to pick up against a background of depressed liquidity, particularly so given the Obon holidays in the early part of the week."
It's certainly been the pattern in the past. Multiyear analyses of dollar-yen performance in August show almost perfectly consistent yen strength. One such analysisof dollar-yen performance through 2005 has the dollar declining an average of 137 pips every August, and in many years the drop exceeded 200 pips.
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