Will Repatriation Boost the Yen in March?

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.