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News from the U. S. and Japan: Which Moves the Yen/Dollar Exchange Rate?

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Author Info
Takatoshi Ito
V. Vance Roley

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Abstract

Intra-daily movements in the yen/dollar exchange rate were examined in four non-overlapping segments within each business day from January1980 to September 1985. The empirical results yielded several conclusions. First, most depreciation of the yen (appreciation of the dollar) from late 1982 to early 1984 occurred in the New York market. The direction of the yen was mostly neutral in the Tokyo market. Also, the volatility of the exchange rate decreased considerably in the Tokyo market. The volatility in the New York market, on the other hand, did not decrease untilvery recently. Second, market efficiency was examined in terms of the random-walk behavior of short-run movements in the yen/dollar rate. Information on the preceding segments within a day was sometimes significant in predicting the exchange rate movement in a market. Third, there is evidence of the "profit-taking" behavior, or overshooting, in that a large jump (more than 3 absolute yen) in any market tends to be reversed by a fifth of the jump during the same day in the next market. Finally,the relative effects of news from the U.S. and Japan were examined explicitly both with respect to possible major events behind large jumps andthe response of the yen/dollar rate to particular economic announcements in both countries. Over the entire sample period, news concerning the U.S. money stock had the only significant effects.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1853.

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Date of creation: Aug 1987
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Handle: RePEc:nbr:nberwo:1853

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Roley, V Vance, 1983. "The Response of Short-Term Interest Rates to Weekly Money Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 344-54, August. [Downloadable!] (restricted)
  2. V. Vance Roley, 1983. "The Response of Short-Term Interest Rates to Weekly Money Announcements," NBER Working Papers 1001, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Ito, Takatoshi, 1988. "Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 296-305, May. [Downloadable!] (restricted)
    Other versions:
  4. V. Vance Roley, 1985. "The response of interest rates to money announcements under alternative operating procedures and reserve requirement systems," Proceedings, Federal Reserve Bank of San Francisco, pages 127-160.
  5. Longworth, David, 1984. "Exchange rates and `news': A comment," Journal of International Money and Finance, Elsevier, vol. 3(1), pages 119-121, April. [Downloadable!] (restricted)
  6. Batten, Dallas S. & Thornton, Daniel L., 1984. "Discount rate changes and the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 279-292, December. [Downloadable!] (restricted)
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  7. Takatoshi Ito, 1987. "Capital Controls and Covered Interest Parity," NBER Working Papers 1187, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Grossman, Jacob, 1981. "The "Rationality" of Money Supply Expectations and the Short-Run Response of Interest Rates to Monetary Surprises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 409-24, November. [Downloadable!] (restricted)
  9. Hakkio, Craig S & Pearce, Douglas K, 1985. "The Reaction of Exchange Rates to Economic News," Economic Inquiry, Oxford University Press, vol. 23(4), pages 621-36, October.
  10. Rudiger Dornbusch, 1980. "Exchange Rate Economics: Where Do We Stand?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1980-1), pages 143-206. [Downloadable!]
  11. Edwards, Sebastian, 1984. "Exchange rates and `news': Reply," Journal of International Money and Finance, Elsevier, vol. 3(1), pages 123-126, April. [Downloadable!] (restricted)
  12. Mussa, Michael, 1979. "Empirical regularities in the behavior of exchange rates and theories of the foreign exchange market," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 11(1), pages 9-57, January. [Downloadable!] (restricted)
  13. Frankel, Jeffrey A & Hardouvelis, Gikas A, 1985. "Commodity Prices, Money Surprises and Fed Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 425-38, November. [Downloadable!] (restricted)
  14. Douglas K. Pearce & V. Vance Roley, 1985. "Stock Prices and Economic News," NBER Working Papers 1296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Edwards, Sebastian, 1982. "Exchange rates and `news': A multi-currency approach," Journal of International Money and Finance, Elsevier, vol. 1(1), pages 211-224, January. [Downloadable!] (restricted)
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  16. Cornell, Bradford, 1983. "The Money Supply Announcements Puzzle: Review and Interpretation," American Economic Review, American Economic Association, vol. 73(4), pages 644-57, September. [Downloadable!] (restricted)
  17. V. Vance Roley, 1982. "Weekly money supply announcements and the volatility of short-term interest rates," Economic Review, Federal Reserve Bank of Kansas City, issue Apr, pages 3-15. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rasmus Fatum & Michael M. Hutchison, . "Is Foreign Exchange Market Intervention an Alternative to Monetary Policy? Evidence from Japan," EPRU Working Paper Series 02-11, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  2. Takatoshi Ito & Yuko Hashimoto, 2006. "Intra-Day Seasonality in Activities of the Foreign Exchange Markets: Evidence From the Electronic Broking System," NBER Working Papers 12413, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Kathryn M. E. Dominguez & Freyan Panthaki, 2007. "The Influence of Actual and Unrequited Interventions," Working Papers 561, Research Seminar in International Economics, University of Michigan. [Downloadable!]
    Other versions:
  4. Rasmus Fatum & Michael Hutchison, 2003. "Effectiveness of Official Daily Foreign Exchange Market Intervention Operations in Japan," NBER Working Papers 9648, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Eric Ghysels & Christian Gouriéroux & Joanna Jasiak, 1995. "Trading Patterns, Time Deformation and Stochastic Volatility in Foreign Exchange Markets," CIRANO Working Papers 95s-42, CIRANO. [Downloadable!]
  6. Martin D. D. Evans(Georgetown University and NBER), . "What are the Origins of Foreign Exchange Movements?," Working Papers gueconwpa~05-05-06, Georgetown University, Department of Economics. [Downloadable!]
  7. Rasmus Fatum & Michael Hutchison & Thomas Wu, 2008. "Do Both U.S. and Foreign Macro Surprises Matter for the Intraday Exchange Rate? Evidence from Japan," EPRU Working Paper Series 2009-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Jan 2009. [Downloadable!]
  8. Rasmus Fatum & Michael M. Hutchison, . "ECB Foreign Exchange Intervention and the Euro: Institutional Framework, News and Intervention," EPRU Working Paper Series 02-10, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  9. V. Vance Roley & Gordon H. Sellon, Jr., 1998. "Market reaction to monetary policy nonannouncements," Research Working Paper 98-06, Federal Reserve Bank of Kansas City. [Downloadable!]
  10. Takatoshi Ito & Kunio Okina & Juro Teranishi, 1988. "News and the Dollar/Yen Exchange Rate, 1931-1933: The End of the Gold Standard, Imperialism, and the Great Depression," NBER Working Papers 2683, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Martin D. D. Evans(Georgetown University and NBER) and Richard K. Lyons(U.C. Berkeley and NBER, Haas School of Business), . "How is Macro News Transmitted to Exchange Rates? (December 2003)," Working Papers gueconwpa~05-05-05, Georgetown University, Department of Economics. [Downloadable!]
  12. Takatoshi Ito & V. Vance Roley, 1991. "Intraday Yen/Dollar Exchange Rate Movements: News or Noise?," NBER Working Papers 2703, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Tanseli Savaser, 2007. "Exchange Rate Response to Macro News: Through the Lens of Microstructure," Department of Economics Working Papers 2007-2, Department of Economics, Williams College. [Downloadable!]
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