The High-Frequency Response of the Rand-Dollar Rate to Inflation Surprises

Greg Farrell, Shakill Hassan and Nicola Viegi

No 201215, Working Papers from University of Pretoria, Department of Economics

Abstract: We examine the high-frequency response of the rand-dollar nominal rate within ten-minute intervals around five minutes before, five minutes after) official inflation announcements, and show that the rand appreciates (respectively, depreciates) on impact when inflation is higher (respectively, lower) than expected. The effect only applies after the adoption of inflation targeting, and is stronger for good news. Our findings are rationalisable by the belief, among market participants, in a credible (though perhaps not particularly aggressive) inflation targeting policy in South Africa; and can be used to monitor changes in currency market perceptions about the monetary policy regime.

Keywords: High-frequency exchange rates; inflation surprises; Taylor rules; inflation targeting; credibility (search for similar items in EconPapers)
JEL-codes: E31 E52 F30 F31 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2012-05
New Economics Papers: this item is included in nep-afr, nep-cba, nep-mac, nep-mon and nep-mst
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The HighFrequency Response of the RandDollar Rate to Inflation Surprises (2012)
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