Seasonal Processes in the Euro - US Dollar Daily Exchange Rate

Abstract

We analyse the pattern of daily Euro - US Dollar exchange rates from the birth of Euro in January 1999 to December 2011. We document that also this series is I(1), as is usual for nominal bilateral exchange rates. However, we find evidence of the presence of day effects – even if they play a more limited role as compared to other exchange rate series over different time periods. More surprisingly, we find statistical significance of some month effects in the first-difference levels of exchange rate, alongside strong variation in their variance across months.

Keywords: Exchange rate, Seasonality, Conditional heteroscedasticity

JEL Classification: F31, C22