Seasonal processes in the Euro--US Dollar daily exchange rate

Roberto Cellini and Tiziana Cuccia

Applied Financial Economics, 2014, vol. 24, issue 3, 161-174

Abstract: We analyse the pattern of daily Euro--US Dollar exchange rate from the birth of Euro, in January 1999, until December 2012. This series is I(1), as is usual for nominal bilateral exchange rates; however, it is far from following a random walk process. We find evidence of the presence of day effects, even if they play a more limited role as compared to other exchange rates observed over previous periods of time. More surprisingly, we find statistical significance of some month effects in the first-differences of exchange rate, and strong variation in their variance across months. Hence, monthly seasonality in daily Euro--US Dollar exchange rate cannot be overlooked, and some explanations are suggested.

Date: 2014
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DOI: 10.1080/09603107.2013.870651

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