The reaction of exchange rates and interest rates to news releases

Hali Edison ()

No 570, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper examines the response of exchange rates and interest rates--U.S. and foreign--to economic news. The news is associated with the surprise component of the monthly release of six U.S. macroeconomic variables. The results suggest that dollar exchange rates systematically react to news about real economic activity--a surprise of 100,000 on nonfarm payroll employment leads to a 0.2 percent appreciation of the exchange rate. In general, exchange rates do not react systematically to news on inflation. By contrast, U.S. interest rates respond to both types of news, although the response continues to be extremely small, on the order of 1 to 2 basis points. Finally, Japanese interest rates systematically react, but to a very minor extent, to news about U.S. real economic activity, while German rates in general do not.

Keywords: Foreign exchange rates; Interest rates (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: The Reaction of Exchange Rates and Interest Rates to News Releases (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:570

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