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The reaction of exchange rates and interest rates of news releases

Author

Listed:
  • Kreuter, Christof
  • Gottschling, Andreas
  • Cornelius, Peter

Abstract

This note examines how the DEM/USD rate and US short-term and long-term interest rates respond to the release of payroll announcements. In contrast to a recent paper by Edison (1997), who employs a linear econometric model, we test the influence of news by comparing the absolute values of the percentage change between the means of symmetrically sampled values of daily exchange rate and interest rates before and after the announcement day to the distribution of absolute changes in means for all periods excluding non-farm payroll news. We find a highly significant reaction for both the DEM/USD rate and bond yields, depending on the window size. Short-term US interest rates, by contrast are hardly affected. Finally, the reaction of inflation indexed bond yields to news announcements is investigated.

Suggested Citation

  • Kreuter, Christof & Gottschling, Andreas & Cornelius, Peter, 1998. "The reaction of exchange rates and interest rates of news releases," Research Notes 98-2, Deutsche Bank Research.
    • Handle: RePEc:zbw:dbrrns:982
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    More about this item

    Keywords

    exchange rates; interest rates; announcement effects; indexed bonds;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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