✦ LIBER ✦

The Reaction of Exchange Rates and Interest Rates to News Releases

✍ Scribed by Hali J. Edison

Publisher: John Wiley and Sons
Year: 1997
Tongue: English
Weight: 138 KB
Volume: 2
Category: Article
ISSN: 1076-9307
DOI: 10.1002/(sici)1099-1158(199704)2:2<87::aid-ijfe39>3.0.co;2-8

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✦ Synopsis

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

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