The Impact of Macroeconomic Announcements on Real Time Foreign Exchange Rates in Emerging Markets

63 Pages Posted: 18 Jul 2009

See all articles by Hyunsoo Joo

Hyunsoo Joo

affiliation not provided to SSRN

Zhiwei Huang

affiliation not provided to SSRN

Fang Cai

Federal Reserve Board

Date Written: May 15, 2009

Abstract

This paper utilizes a unique high-frequency database to measure how exchange rates in nine emerging markets react to macroeconomic news in the U.S. and domestic economies from 2000 to 2006. We find that major U.S. macroeconomic news have a strong impact on the returns and volatilities of emerging market exchange rates, but many domestic news do not. Emerging market currencies have become more sensitive to U.S. news in recent years. We also find that market sentiment could sway the impact of news on these currencies systematically, as good (bad) news seems to matter more when optimism (pessimism) prevails. Market uncertainty also interacts with macroeconomic news in a statistically significant way, but its role varies across currencies and news.

Keywords: exchange rate, emerging market, macroeconomic news, high-frequency data

JEL Classification: F31, G14, G15

Suggested Citation

Joo, Hyunsoo and Huang, Zhiwei and Cai, Fang, The Impact of Macroeconomic Announcements on Real Time Foreign Exchange Rates in Emerging Markets (May 15, 2009). FRB International Finance Discussion Paper No. 973, Available at SSRN: https://ssrn.com/abstract=1434412 or http://dx.doi.org/10.2139/ssrn.1434412

Hyunsoo Joo

affiliation not provided to SSRN ( email )

Zhiwei Huang

affiliation not provided to SSRN ( email )

Fang Cai (Contact Author)

Federal Reserve Board ( email )

Office of Financial Stability Policy and Research
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Washington, DC 20551
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