SocGen Flags Seasonal Headwinds For EM FX In August

SocGen provide an overview of EM FX seasonals for August. For spot
they note that "avg. EM FX losses in Aug of 2% (5 years) & 1.5% (10
years). EM FX has depreciated 80% of the time in the past 10 Augusts.
EM FX tends to see large losses in Aug (compared to other months) &
infrequent gains have been very small vs. losses. The worst performers in
Aug have been TRY, ZAR, BRL & RUB followed by MXN, INR & IDR. Two
factors are considered for constructing a spot trade idea for Aug: (1)
seasonality (2) price action (currencies that have recovered the most from
their weakest YtD levels could be more susceptible to falling the most in
Aug). Based on this framework, short BRL and ZAR screen as the
most attractive." They note "outsized vol. spikes in Aug compared with
other months. Implied vol. has risen in August in nine out of the past 10
years. Large asymmetry (similar to spot) – vol. spikes in August are
significantly larger than months when vol. falls. The TRY, ZAR, MXN
& RUB have experienced the largest increases in 3-month FX implied vol. in Aug."