Currencies | Feb 01 2013
By Andrew Nelson
For the last ten years the Aussie Dollar has run higher against the US Dollar in February, except for 2002. It has also run higher consistently against most other G10 currencies as well. ANZ Research senior FX strategist Khoon Goh has found a few ways to take advantage of this trend.
Goh notes the currency that posts the best directional move out of all G10 currencies in February is the AUD, which has risen 10 out of the last 13 years. While the average spot return may not be all that impressive at 0.74%, a close looks shows that since 2002, the AUD still posted positive gains in all February months bar one.
Also clouding the picture are some large declines in 2000 and 2001, which has pulled the average spot return trend for the AUD lower. However, Goh notes the median spot return for the AUD is a much nicer looking 1.31%, while the average return since 2002 is 1.55%.
The bank’s analysis also shows that the crosses that tend to post the best overall returns over February both involve the AUD. The AUD/KRW (Korean won) has averaged spot returns of 1.53%, with gains in 9 out of the past 13 years. The AUD/INR (Indian rupee) has posted more modest gains of 1.13%.
The overall trend shows the AUD tends to post gradual gains as the month progresses, especially from the second week onwards. Not coincidentally, as the southern hemisphere summer draws to a close.
ANZ says the most obvious way to take advantage of this February seasonality is to go long AUD versus the USD However, going long AUD against KRW and INR tends to offer both better returns, while also being a good way to take the USD risk out of the trade, he says.
However, if you are going to try to make this February play, Goh has a short list of things to watch out for. First, there’s the RBA meeting on the 5th of February and after that there’s the G20 Finance Ministers and Central Bank Governors’ meeting on 15-16 February. While another cut from the RBA is not expected, there’s always the chance of a surprise and it probably won’t help the AUD on the way to maintaining its February trend.
Also, with the moves the Japanese government has made of late to weaken the yen, a few arguments are likely to be had. This could well feed some headline-driven moves in currency markets, with there also being a chance of some official releases that could shift markets.
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