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Is There Seasonality in the Yen in March?
03/09/2010 12:01 am EST
It is commonly believed that March tends to be a positive month for the Japanese yen because of the fiscal year’s end in Japan. Tax incentives and the desire to window dress their balance sheets usually encourage repatriation by Japanese corporations.
However, with the Japanese yen selling off aggressively against the dollar towards the end of last week, many traders may be wondering whether repatriation flows this year will overshadow the improvements in risk appetite which usually pressure the yen.
Contrary to popular belief, there is no seasonal trading pattern in USD/JPY during the month of March over the last ten years. As indicated in the following chart, the yen appreciated against the dollar only five out of the past ten years, or 50% of the time. This type of trading behavior is evident in GBP/JPY and NZD/JPY.
The same lack of consistency can be seen in EUR/JPY, which fell only four out of the last ten years. Although some may argue that this suggests an upward bias in EUR/JPY during March, it is not substantiated because EUR/JPY was basically unchanged during two out of the six up months.
The only yen cross that has any type of seasonality bias is AUD/JPY, which has fallen seven out of the last ten years. Therefore, contrary to popular belief, repatriation flows do not provide much of a boost for the yen in March. So don’t just believe what you hear, that traders should avoid selling the yen crosses at the beginning of the month and buy it back at the end without any fundamental support.
By Kathy Lien
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