Does FOMC News Increase Global FX Trading?

38 Pages Posted: 8 Mar 2008

See all articles by Andreas M. Fischer

Andreas M. Fischer

Swiss National Bank; Centre for Economic Policy Research (CEPR)

Angelo Ranaldo

University of St. Gallen

Multiple version iconThere are 2 versions of this paper

Date Written: February 2008

Abstract

Does global currency volume increase on days when the Federal Open Market Committee (FOMC) meets? To test the hypothesis of excess currency volume on or around FOMC days, we use a novel data set from the Continuous Linked Settlement (CLS) Bank. The CLS measure captures roughly half of the global trading volume in foreign exchange (FX) markets. We find strong evidence that trading volume increases across currency areas on FOMC days during 2003 to 2007. This result holds irrespective of the size of price changes in currency markets and FOMC policy shocks. We interpret the evidence of excess FX trading on FOMC days to be inconsistent with standard models of homogenous agents.

Keywords: Trading volume, FOMC, Global linkages

JEL Classification: F31, G12

Suggested Citation

Fischer, Andreas M. and Ranaldo, Angelo, Does FOMC News Increase Global FX Trading? (February 2008). Available at SSRN: https://ssrn.com/abstract=1101583 or http://dx.doi.org/10.2139/ssrn.1101583

Andreas M. Fischer

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland
+41 1 631 3294 (Phone)
+41 1 631 3901 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Angelo Ranaldo (Contact Author)

University of St. Gallen ( email )

Swiss Institute of Banking and Finance s/bf-HSG
Unterer Graben 21
St. Gallen, 9000
Switzerland
+41712247010 (Phone)

HOME PAGE: http://www.sbf.unisg.ch/Lehrstuehle/Lehrstuhl_Ranaldo/Homepage_Ranaldo.aspx

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