📝 Dollar Tends to Outperform In 2nd Half Of September: J.P. Morgan FX Strategy

Seasonality went more or less to script in August. On top of that, the 3%+ return that the USD TWI delivered in September 2022 marked the third-best month for the dollar dating back to the onset of the pandemic. As such, we refresh the exercise for September which is typically another solid, though not extraordinary, month for USD. August and May remain the top months for the dollar in nominal terms. Particularly when adjusting for volatility (ie com- puting a sharpe ratio), August screens as the best month of the year for USD.

Looking forward, the USD has, on average, outperformed all global FX for the month of September, including positive returns in each instance since the pandemic.

We also took a more granular look at the September price action and find that the USDs outperformance manifests more in the back-half of the month, on average. Again, highlighting the wide range of outcomes across the post-GFC period, a simple average of USD TWI across the month of September suggests that USD TWI returns are relatively flat until the later stages of September. - J.P. Morgan