Does season have and effect on currency movements?

I read an article on the interest.co.nz website about the NZD the other day. The author made the statement:

NZ dollar has only been able to appreciate upwards on three occasions in August over the last 14 years.

That seemed like a very interesting observation and something worth exploring more from a currency trading perspective. The reason the author gave for this was:

US and European investment bankers and hedge fund managers all go on their summer holidays in August, therefore they reduce their speculative currency positions and locally, the winter month of August is very much the “off-season” for our major primary producer commodity exporters (buyers of Kiwi dollars) and it is a time when the big importers of retail goods (sellers of Kiwi dollars) start to ramp up forward hedging for their increased Christmas trade volumes.

Could there be something in this? Do other markets have similar trends? I wanted to investigate more. I ended up coding a small program to get the open prices for each month of the major currencies against the USD and then computed the number of pips that increase or decrease over the course of the month.

This, of course, does not take into account any volatility within the month, which can be significant.

The data does indeed show the analysis does indeed appear to be valid. 7/10 years saw a decrease, and of the 3 years that saw a (quite modest) increase. September also appears to be a weak month, with either a decrease or just a sideways drift.

NZD/USD

The NZD tends to decline against the USD in the month of August. September continues the decline or drifts sideways.

Change in the value of the NZD/USD by month and year

AUD/USD

Much like the NZD/USD, August and September sees a decline in the value of the currency.

Change in the value of the AUD/USD by month and year

USD/CAD

There does not appear to be any clear monthly trends for the USD/CAD.

Change in the value of the USD/CAD by month and year

GBP/USD

Compared to the antipodean currencies, the Pound moves a lot more on a month-to-month basis. May, August, and September seem to be weak months for the Pound.

Change in the value of the GBP/USD by month and year

EUR/USD

The Euro is weakest in February, August, September, and October, but much stronger through December.

Change in the value of the EUR/USD by month and year

USD/CHF

The USD is strongest against the Franc in June and December and weakest in September.

Change in the value of the USD/CHF by month and year

USD/JPY

The Yen appears to historically strengthen against the USD in July each year and weaken again in September.

Change in the value of the USD/JPY by month and year

Rationale

I’d love to know the rationale for why these trends exist. If you have any insights or theories, please leave them in the comments section.

Conclusion

There do appear to be trends for certain currencies for certain months of the year, which are useful to take into account when currency trading.

Did you find this analysis useful? If there is something you’d like analysed, let me know in the comments.