Do Both U.S. and Foreign Macro Surprises Matter for the Intraday Exchange Rate? Evidence from Japan
AbstractWe 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 InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 2009-01.
Length: 20 pages
Date of creation: Nov 2008
Date of revision: Jan 2009
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Foreign Exchange Rates; Intraday Data; Macroeconomic News Effects;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
- NEP-IFN-2009-03-14 (International Finance)
- NEP-MON-2009-03-14 (Monetary Economics)
- NEP-MST-2009-03-14 (Market Microstructure)
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