The reaction of exchange rates and interest rates of news releases

Christof Kreuter, Andreas Gottschling and Peter Cornelius

No 98-2, Research Notes from Deutsche Bank Research

Abstract: This note examines how the DEM/USD rate and US short-term and long-term interest rates respond to the release of payroll announcements. In contrast to a recent paper by Edison (1997), who employs a linear econometric model, we test the influence of news by comparing the absolute values of the percentage change between the means of symmetrically sampled values of daily exchange rate and interest rates before and after the announcement day to the distribution of absolute changes in means for all periods excluding non-farm payroll news. We find a highly significant reaction for both the DEM/USD rate and bond yields, depending on the window size. Short-term US interest rates, by contrast are hardly affected. Finally, the reaction of inflation indexed bond yields to news announcements is investigated.

Keywords: exchange rates; interest rates; announcement effects; indexed bonds (search for similar items in EconPapers)
JEL-codes: F31 F40 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dbrrns:982

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