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Does FOMC news increase global FX trading?

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  • Fischer, Andreas M.
  • Ranaldo, Angelo

Abstract

Does global currency volume increase on Federal Open Market Committee (FOMC) days? To test hypotheses of abnormal currency volume on FOMC days, a new data set from the Continuous Linked Settlement (CLS) Bank is used. The CLS measure captures more than half of the global trading volume in foreign exchange (FX) markets. The evidence shows that FX trading volume increases about 5% in the spot and the spot-next market following FOMC deliberations. The novelty of this result is that the aggregated CLS data controls for responses in various derivatives markets: a feature that existing studies based on intradaily data for specific trading platforms do not consider.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 11 (November)
Pages: 2965-2973

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:11:p:2965-2973

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: FX trading activity FOMC communication Global linkages FX liquidity;

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Cited by:
  1. Rosa, Carlo, 2013. "The financial market effect of FOMC minutes," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 67-81.

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