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The sign switch effect of macroeconomic news in foreign exchange markets

Walid Ben Omrane and Tanseli Savaser

Journal of International Financial Markets, Institutions and Money, 2016, vol. 45, issue C, 96-114

Abstract: We examine an unusual episode in the behavior of the euro, pound and yen exchange rate markets when the dollar appreciated (depreciated) against the three major currencies, in response to unfavorable (favorable) US growth news during the global financial crisis. Contrary to the previous findings, we show that, for each currency pair, only a small subset (about a third) of the most significant macro news effects reversed sign, primarily announcements regarding consumption, credit, labor and housing markets. Our results reveal that announcement chronology within a month matters, in that specifically the earliest releases within an indicator category exhibit sign asymmetry.

Keywords: Financial crisis; Exchange rates; US dollar; Macroeconomic news; High-frequency data (search for similar items in EconPapers)
JEL-codes: F31 F4 G1 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:intfin:v:45:y:2016:i:c:p:96-114