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Do Both U.S. and Foreign Macro Surprises Matter for the Intraday Exchange Rate? Evidence from Japan

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Author Info

  • Rasmus Fatum

    (University of Alberta)

  • Michael Hutchison

    (University of California, Santa Cruz)

  • Thomas Wu

    (University of California, Santa Cruz)

Abstract

We investigate the effects of both U.S. and Japanese news surprises, measured as the difference between macroeconomic announcements and preceding survey expectations, on the intraday JPY/USD exchange rate. No previous study has considered the intraday JPY/USD exchange rate responses to a broad set of comparable news surprises from both the U.S. and Japan. We show that news surprises from Japan are as influential as those from the U.S. in moving 5-minute JPY/USD exchange rate returns and, therefore, focusing on U.S. news while disregarding foreign news misses half the story. Our results also show that distinguishing between positive and negative news surprises and the state of the Japanese business cycle is important in understanding the link between exchange rates and news.

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Bibliographic Info

Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 2009-01.

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Length: 20 pages
Date of creation: Nov 2008
Date of revision: Jan 2009
Handle: RePEc:kud:epruwp:09-01

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Keywords: Foreign Exchange Rates; Intraday Data; Macroeconomic News Effects;

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