Will Repatriation Boost the Yen in March?

Last updated 3/8/2010 9:00 AM ET (GMT -5) 6 Comments

Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Kathy Lien

Director of Currency Research, GFT

It is commonly believed that March tends to be a positive month for the Japanese Yen because of the fiscal year 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 pressures the Yen. 

Contrary to popular belief, there is no seasonal trading pattern in USD/JPY during the month of March over the last 10 years. As indicated in the following chart, the Yen appreciated against the dollar only 5 out of the past 10 years, or 50 percent 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 4 out of the last 10 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 2 out of the 6 up months.

The only Yen cross that has any type of seasonality bias is AUD/JPY which has fallen 7 out of the last 10 years. Therefore contrary to popular belief, repatriation flows does not provide much of a boost for the Yen in March.  So don’t just believe what you here - that traders should avoid selling the yen crosses at the beginning of the month and buying it back at the end without any fundamental support. 

Comments (6)

yen-jan

March 08, 2010 at 02:57 PM ET

This is quite interesting. As far as this year is concerned, there were reports that some yen buying for repatriation may already have gone through the FX market at the end of February, taking advantage of the move in $/yen up to 92.00. If so, then there might be less left for this month. Can anyone confirm ??

Semaj

March 08, 2010 at 04:07 PM ET

The usd/jpy DAILY chart made a higher high in early Jan. and may be currently bouncing off a 61.8 fib, higher low possibly. Watch for a break thru the daily 200 ema next with a retest of the Jan high. Just a thought :) Good Luck !

FXDragon

March 08, 2010 at 04:32 PM ET

Jan high. Wow hold your horses man. Probably some more yen selling this week. But this month in general, birds say funds will buy yen. I hope so.

Semaj

March 08, 2010 at 09:23 PM ET

IF the 61.8 fib holds, 97.50 could be in sight. The move up last week had some gas in the tank don't you think. Weekly momentum looks to be building to the long side. Judging by your posts @ 360 I dont think you trade with hope up your sleeve :) We'll see.

schultzz.at

March 09, 2010 at 01:50 AM ET

I remain neutral waiting for a test of 88 to go long. NFP numbers surprised to the upside on 06/05/09, 08/07/09 and 12/04/09. In neither case we saw a follow-through in the USD/JPY. In December the pair took out the base of the 'initial claims/NFP move' before going higher. O.K. the pair was in a downtrend then and is range trading now.

From an intermarket perspective: The correlations with the Dow and VIX have become weaker, but the USD/JPY is still positively correlated with the Dow and negatively with the VIX.
I expect a drop in the Dow and a surge in volatility, because 'traders fear nothing more than a lack of fear' and 'stock valuations have gotten out of line with fundamentals'.

As US bond yields are concerned: This market is still highly correlated with the USD/JPY at 0.88. The US Treasury is auctioning 3yr/10yr/30yr notes/bonds this week starting today.
Tom Schultz.

FXDragon

March 09, 2010 at 03:46 AM ET

Right. So you could benefit from the way down to 88 since range trading is favoring the downside. Also i think it will break 88 this time so i'll go long from a lower level.
But thats a months time. Should be a while.

Add Your Comment

Please login to post a comment or sign up for an FX360® account.

Loading...

About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.