The clearest FX seasonal theme in August is JPY strength

Overview

This report examines the historical seasonality of the FX market in August. The conclusion is that August is one of the strongest months for FX seasonality, with the most prominent pattern being broad JPY outperformance, while high-beta, commodity, and carry currencies come under pressure. The report argues that August seasonality differs from the more year-end liquidity- and hedging-flow-driven pattern of December, and is more likely related to the combined effects of risk-off sentiment, information-sensitive trading, and thinner summer liquidity.

Core views

The core views are as follows: first, more than 20 sample currency pairs show statistically significant seasonality based on daily closing prices in August; second, JPY appreciation against both G10 and EM currencies is the most stable theme, making long JPY the strongest August seasonal expression in the report; third, high-beta, commodity, and carry currencies such as ZAR, MXN, AUD, and NZD are more prone to weakness in August, especially against JPY; fourth, ZAR has historically been the weakest currency in the sample in August, although performance in 2024 to 2025 was not fully consistent; fifth, NZD weakness may stem not only from risk sentiment but also from the seasonal trough in New Zealand dairy exports.

Analysis framework

The report identifies seasonality by comparing August returns with returns in all other months of the year. Specifically, it regresses each currency pair's returns on an August dummy variable; if the coefficient is statistically significant, it indicates a systematic difference in August returns relative to other months. The report also uses London closing prices, cross-session returns, and intraday returns to determine whether seasonality exists and during which part of the trading day it forms.

Methodology notes

• Statistical seasonality testAugust dummy variable regression

  August is set as a dummy variable with a value of 1, while other months are set to 0, to test whether August returns systematically deviate from those of other months.

  This method is used to identify monthly seasonality in historical FX returns; a statistically significant coefficient indicates that August returns have historically been consistently higher or lower than in other months.

• Trading session decompositionComparison of London closing prices and intraday session returns

  Returns are decomposed into sessions such as Asia, early London, the London-New York overlap, and the New York afternoon.

  The report uses this decomposition to distinguish liquidity-driven, information-driven, and regional flow factors; JPY appreciation is mainly concentrated in the London-New York overlap session.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• JPY

  Primary beneficiary currency in August

  Strengths

  It has a broad history of outperformance against both G10 and EM currencies, and USD/JPY has shown JPY appreciation in 13 of the past 20 Augusts.

  Weaknesses

  The seasonality is based on historical statistics and does not guarantee future returns; summer events and positioning may alter short-term performance.

  Comparison

  Compared with USD, JPY's safe-haven seasonality in August is broader and stronger.

  Risks

  If global risk appetite improves, yen-related flows reverse, or expectations for Japanese repatriation fail to materialize, JPY's seasonal advantage may weaken.

• ZAR

  Primary pressured currency in August

  Strengths

  Commodity prices, attractive carry, and improving sentiment toward South African assets may at times offset the seasonal weakness.

  Weaknesses

  Historically it has been the weakest performer in August, with significant depreciation tendencies against both USD and JPY, especially against JPY.

  Comparison

  Its weakness versus JPY is stronger than versus USD, with a t-statistic of about -3.1.

  Risks

  Commodity prices, carry attractiveness, sentiment toward South African assets, and global risk events may invalidate or amplify the historical seasonality.

• NZD

  Currency biased weaker in August

  Strengths

  If Asian-session flows or seasonal pressure from New Zealand exports ease, the weakness may moderate.

  Weaknesses

  It shows persistent August weakness against USD, EUR, CAD, and JPY, especially during the Asian session.

  Comparison

  Based on London closing prices, NZD is weakest against JPY, followed by EUR, USD, and CAD.

  Risks

  Dairy export seasonality, shifts in risk appetite, and Asian-session liquidity may jointly amplify volatility.

• USD

  Secondary safe-haven beneficiary currency

  Strengths

  It tends to strengthen against a range of currencies in August, especially some EM currencies.

  Weaknesses

  The report believes USD strength is less broad than JPY strength and is driven more by the New York afternoon session.

  Comparison

  JPY is the more prominent August safe-haven beneficiary, while USD is more of a secondary safe-haven expression.

  Risks

  If risk appetite improves or US-related macro events change expectations for the dollar, USD's seasonal strength may be unstable.

Key data

• Number of currency pairs with significant seasonalityMore than 20Statistically significant within a sample of 60 currency pairs based on August London closing prices.
• Number of currency pairs significant on an intraday basisAbout 15Intraday seasonality coverage in August is weaker than the daily closing price measure and also weaker than December intraday seasonality.
• August t-statistic for ZAR versus USDAbout -2.0Indicates a statistically significant tendency for ZAR to depreciate against USD in August.
• August t-statistic for ZAR versus JPYAbout -3.1The weakest reading among the G10 and EM sample, indicating that ZAR's August weakness versus JPY is more pronounced.
• Share of August declines for ZAR over the past 10 yearsAbout 60% versus USD, about 70% versus JPYReflects that ZAR was under pressure in most Augusts over the past decade.
• Number of August declines for ZAR over the past 20 years13 timesZAR depreciated 13 times out of the past 20 Augusts against both USD and JPY.
• Historical August performance of USD/JPYJPY appreciated against USD in 13 of the past 20 AugustsThe report says this pattern remained strong in 2024 and 2025.

Impact & implications

The report's investment implication is that August FX positioning should focus on long JPY opportunities in a risk-off and low-liquidity environment, while remaining cautious toward the seasonal downside risk in high-beta, commodity, and carry currencies. Since JPY moves are concentrated in the London-New York overlap session, trade execution and risk monitoring should also pay attention to information releases and price discovery during that period.

Risks

• Historical seasonality and backtest results cannot guarantee future returns, and actual trading outcomes may deviate significantly from historical patterns.
• ZAR performance in 2024 to 2025 shows that commodity prices, carry, and asset sentiment can temporarily invalidate seasonal relationships.
• Thinner summer liquidity in August may amplify information shocks, but it may also increase execution costs and price-gap risk.
• Macro and geopolitical events may reinforce or reverse the direction of risk-off trades.
• FX, derivatives, and leveraged trading involve exchange-rate volatility, liquidity, counterparty, and potential excess-loss risks.

What to watch

• Price action in JPY crosses during the London-New York overlap session in August.
• Hourly return distributions of USD/JPY, GBP/JPY, and JPY against high-beta and carry currencies.
• Whether ZAR continues to be supported by commodity prices, carry, and sentiment toward South African assets.
• NZD performance during the Asian session and seasonal data on New Zealand dairy exports.
• Macro, credit-rating, trade, and geopolitical events during August that could trigger safe-haven demand.