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Exchange Rates and FOMC Days

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  • SEUNG CHAN AHN
  • MICHAEL MELVIN

Abstract

Federal Open Market Committee (FOMC) meeting days provide a natural laboratory for exploring the effects of policy uncertainty and learning on exchange rate determination. A reasonable hypothesis is that the meeting outcomes are price-relevant public information associated with a switch to an "informed-trading state." Evidence is provided by intradaily exchange rates for 10 FOMC meetings. A particularly interesting finding is that the informed-trading regime tends to emerge during the time that the FOMC meets. An extensive search of public news indicates that the informed trading cannot be explained as the response to public information. Copyright 2007 The Ohio State University.

Suggested Citation

  • Seung Chan Ahn & Michael Melvin, 2007. "Exchange Rates and FOMC Days," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1245-1266, August.
  • Handle: RePEc:mcb:jmoncb:v:39:y:2007:i:5:p:1245-1266
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    Citations

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    Cited by:

    1. Fischer, Andreas M. & Ranaldo, Angelo, 2011. "Does FOMC news increase global FX trading?," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2965-2973, November.
    2. Michael Melvin & Christian Saborowski & Michael Sager & Mark P. Tayor, 2010. "Bank of England Interest Rate Announcements and the Foreign Exchange Market," International Journal of Central Banking, International Journal of Central Banking, vol. 6(3), pages 211-247, September.
    3. repec:eee:jimfin:v:74:y:2017:i:c:p:283-300 is not listed on IDEAS
    4. Kevin Krieger & Nathan Mauck & Denghui Chen, 2012. "VIX changes and derivative returns on FOMC meeting days," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 26(3), pages 315-331, September.
    5. Jiang, George J. & Lo, Ingrid, 2014. "Private information flow and price discovery in the U.S. treasury market," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 118-133.
    6. Gregory H. Bauer & Clara Vega, 2004. "The Monetary Origins of Asymmetric Information in International Equity Markets," Staff Working Papers 04-47, Bank of Canada.
    7. repec:sbe:breart:v:36:y:2016:i:2:a:46421 is not listed on IDEAS
    8. Beckmann, Joscha & Czudaj, Robert, 2017. "Exchange rate expectations since the financial crisis: Performance evaluation and the role of monetary policy and safe haven," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 283-300.

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