History suggests the dollar is about to rise

History suggests the dollar is about to rise
The greenback has strengthened in each of the past 6 Septembers.
AUG 30, 2023
By  Bloomberg

Dollar bulls have history on their side going into September as the currency has strengthened during that month for six years in a row.

Not only has the Bloomberg dollar index risen every September since 2017, but its average gain of 1.2% in that month also beats the performance of any other month over the same period. Strategists say reasons include quarter-end buying and a general increase in haven demand ahead of October, which is notorious for stock-market declines.

“The month of September tends to be good for the dollar and the usual explanation is that risk aversion tends to rear its ugly head and this is boosting demand for the high-yielding, safe-haven king of G-10 FX,” said Valentin Marinov, head of Group-of-10 foreign-exchange research and strategy at Credit Agricole CIB in London.

“A seasonality analysis of measures of risk aversion like the VIX Index seem to corroborate that conclusion,” he said. 

HAWKISH FED

There are plenty of fundamental reasons specific to 2023 that may underpin the dollar next month too, such as a relatively hawkish Federal Reserve and elevated Treasury yields, other strategists say.

“The bias of course will be for the dollar to probably continue to perform near-term given the growth and economic performance advantage,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “It looks like all the ingredients, at least in the near-term, favor a higher dollar from here.”

Trading in options provides further evidence that the market is positioning for gains in the dollar during September.

Risk reversals based on the Bloomberg dollar index — contracts that provide a hedge against strength or weakness in the US currency — show that those protecting against gains in the greenback are trading a premium to those hedging versus losses.

Latest News

Integrated Partners, Kestra welcome multigenerational advisor teams
Integrated Partners, Kestra welcome multigenerational advisor teams

Integrated Partners is adding a mother-son tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.

Trump not planning to fire Powell, market tension eases
Trump not planning to fire Powell, market tension eases

Futures indicate stocks will build on Tuesday's rally.

From stocks and economy to their own finances, consumers are getting gloomier
From stocks and economy to their own finances, consumers are getting gloomier

Cost of living still tops concerns about negative impacts on personal finances

Women share investing strengths, asset preferences in new study
Women share investing strengths, asset preferences in new study

Financial advisors remain vital allies even as DIY investing grows

Trump vows to 'be nice' to China, slash tariffs
Trump vows to 'be nice' to China, slash tariffs

A trade deal would mean significant cut in tariffs but 'it wont be zero'.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.