A Shift in Dollar Autumn Seasonality Since the Great Recession

September 11, 2017

The dollar has experienced a marginally soft tone on balance since the U.S. Labor Day holiday. Bilateral dollar values against both the euro and yen have each declined 0.8% since the New York close on Friday, September 1.

A depreciating bias in autumn also characterized the dollar for much of the post-1973 era of floating, market-determined dollar exchange rates. From a seasonal standpoint, the calendar year naturally divides into three segments. Winter-spring trading end at the U.S. Memorial Day weekend. Summer lies between that holiday and Labor Day, and it is followed by the autumn period. The dollar fell against the German mark and/or euro in 24 of 32 years to and including 2007 when the financial crisis began. On average for all those years, the dollar lost 2.7 per year. The U.S. currency also posted an average loss during the autumn season of 2.3% over the years from 1980 to 2007.

The U.S. economy is now in the ninth year of an economic expansion that commenced in the middle of 2009. This business cycle has seen the dollar’s autumnal bias shift from weakness to strength. Over the six autumns from 2009 to 2014, the dollar on average rose 1.0% each year, including a gain of 8.6% against the euro in 2014. The U.S. currency performed even more strongly relative to the yen, leaping 15% in the autumn of 2014 and recording an average advance for those six years of 5.1%. Only in 2010, did the dollar fall against the yen in this final calendar year season. In 2015, the dollar climbed 2.6% against the euro and 1.0% versus the yen, and last year’s autumn advances amounted to 12.3% against the yen and 6.0% versus the euro.

The autumn trading season of 2017 is still very young, and the dollar’s initial net loss has not been significant. One key factor to watch will be President Trump’s selected nominees for Fed Chair and Vice Chair. Another big development will be the German parliamentary election later this month. A major economic conundrum continues to be the persistence of low inflation in an economic upswing that’s now getting long in the tooth. Related to that, long-term interest rates remain very low. Just a decade ago, ten-year sovereign debt yields set highs in 2007 of 5.57% in Great Britain, 5.33% in the United States, 4.69% in Germany, and 1.98% in Japan. Despite perceived disparities in the monetary policy cycles of these economies, long-term interest rates spreads no longer seem sufficiently wide or independently-driven to generate big changes in the dollar.

In the absence of a major surprise, seasonal forces may become a dollar mover in the waning months of this year. The question remains which bias will it be — the selling pressure that often characterized the years before the Great Recession or the firm path followed in more recent years?

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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