Forecasting Exchange Rates with Commodity Convenience Yields
AbstractThis paper investigates whether commodity convenience yields - the yields that accrue to the holders of physical commodities - can predict the exchange rate of commodity-exporters' currencies. Predictability is a consequence of the fact that i) convenience yields are useful predictors for commodity prices and ii) commodity currencies have a strong relationship with commodity prices. The empirical evidence indicates that there is a significant relationship between aggregate measures of convenience yields and commodity currencies' exchange rate, both in-sample and out-of- sample. A high level of convenience yields strongly predicts a depreciation of the Australian, Canadian and New Zealand dollars exchange rates at horizons of 1 to 24 months.
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Bibliographic InfoPaper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 12.03.
Length: 40 pages
Date of creation: Mar 2012
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-06 (All new papers)
- NEP-FOR-2012-10-06 (Forecasting)
- NEP-MON-2012-10-06 (Monetary Economics)
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.:
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