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Does FOMC News Increase Global FX Trading?

  • Andreas M. Fischer
  • Angelo Ranaldo

Does global currency volume increase on days when the Federal Open Market Committee (FOMC) meets? To test the hypothesis of excess currency volume on FOMC days, we use a novel data set from the Continuous Linked Settlement (CLS) Bank. The CLS measure captures roughly half of the global trading volume in foreign exchange (FX) markets. We find strong evidence that trading volume increases in the order of 5% across currency areas on FOMC days during 2003 to 2007. This result holds irrespective of the size of price changes in currency markets and FOMC policy shocks. The new evidence of excess FX trading on FOMC days is inconsistent with standard models of the asset market approach with homogenous agents.

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Paper provided by Swiss National Bank in its series Working Papers with number 2008-09.

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Length: 43 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:snb:snbwpa:2008-09
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