April Seasonals Not Favorable For Most Currencies

As we approach the end of March and move into April, we are typically entering a period which is less favorable from a seasonal standpoint for most Asia currencies.

• The chart below plots average spot returns, in April, for all the major EM Asia currencies for the past 5yrs and the past 10yrs.
• Only IDR stands out as having positive gains on average in the month. The last 5 years is biased by the very strong rise we saw in Apr 2020 as market risk aversion fell as policy makers responded to the Covid outbreak. It the last 10 years IDR has risen in 5 Apr's and fallen in 5.
• For currencies like KRW and CNH, seasonal weakness has become more pronounced during April in the past 5 years compared to the prior period. A lot of this is related to outflows in terms of dividends/income outflows in terms of offshore holdings of local assets.
• The negative seasonality is less pronounced for other currencies in the region in April, but nevertheless still generally evident. Outside of IDR gains we tend to see TWD, SGD and PHP fair the best.
• It's also noteworthy that negative seasonality persists into May for most currencies in the region. For the BBG Asia Dollar index, the average drop in May is 0.68% for the past 5yrs, versus a 0.50% average drop in April. For the past 10yrs the results are similar in terms of average drop in May.

Source: MNI - Market News/Bloomberg