The Reaction of Exchange Rates and Interest Rates to News Releases
AbstractThis paper examines the response of exchange rates and interest rates--US and foreign--to economic news. The news is associated with the surprise component of the monthly release of six US macroeconomic variables. The results suggest that dollar exchange rates systematically react to news about real economic activity--a surprise of 100,000 on non-farm payroll employment leads to a 0.2% appreciation of the exchange rate. In general, exchange rates do not react systematically to news on inflation. In contrast, US interest rates respond to both types of news, although the response continues to be extremely small, of the order of 1 to 2 basis points. Finally, Japanese interest rates systematically react, but to a very minor extent, to news about US real economic activity, while German rates, in general, do not. Copyright @ 1997 by John Wiley & Sons, Ltd. All rights reserved.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 2 (1997)
Issue (Month): 2 (April)
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Web page: http://www.interscience.wiley.com/jpages/1076-9307/
Other versions of this item:
- Hali J. Edison, 1996. "The reaction of exchange rates and interest rates to news releases," International Finance Discussion Papers 570, Board of Governors of the Federal Reserve System (U.S.).
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- Becker, Kent G & Finnerty, Joseph E & Kopecky, Kenneth J, 1995. "Domestic macroeconomic news and foreign interest rates," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 763-783, December.
- Douglas K. Pearce & V. Vance Roley, 1985.
"Stock Prices and Economic News,"
NBER Working Papers
1296, National Bureau of Economic Research, Inc.
- Ghosh, Sucharita & Lien, Donald, 1995. "Data Revision and Market Response: The Case of United States Trade Balance Announcements," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(2), pages 265-75, May.
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