Summertime, and the currency trading ain’t easy

NEW YORK: That sound you hear is currency traders groaning about having to cancel their August vacations.

Over the last decade or so, the last full month of summer in the northern hemisphere has become notorious for big, unexpected moves in financial markets. This year, currencies are living up to that reputation.

The Bloomberg Pound Index was poised for its sixth straight decline in late New York trading Thursday, its longest slump since last August.

New Zealand's dollar fell the most since October against a basket of developed-market peers. Turkey's lira can't find a bottom, dropping again Thursday to bring its decline for this month to 11.4% already.

Russia's ruble isn’t far behind, weakening 6.21%. On the other side of things, the yen is doing the exact opposite of what Japanese officials want, gaining more than 2% since July against its peers and already making August the second-best month for the currency over the past year.

At a time when most are lamenting a drop in cross-asset volatility, a JPMorgan index measuring such gyrations in emerging-market currencies has jumped to its highest since January 2017. The upshot is that more traders are looking to hide out in the dollar, with net long positions in the greenback by hedge funds and other large speculators rising to the highest since early last year, Commodity Futures Trading Commission data show.

The strategists at Credit Suisse wrote that “as far as idiosyncratic themes go, they range from the now relatively mundane and familiar,” such as Brexit tensions and the potential for a Bank of Japan policy shift, “to the highly unpredictable,” including US sanctions on Turkey and Russia, political upheaval in Brazil and corruption scandals in Argentina. — Bloomberg