Does FOMC News Increase Global FX Trading?

39 Pages Posted: 10 Jun 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: March 1, 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 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 in the order of 5% 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. The new evidence of excess FX trading on FOMC days is inconsistent with standard models of the asset market approach with homogenous agents.

Keywords: FOMC, Global linkages, Trading volume

JEL Classification: F31, G12

Suggested Citation

Fischer, Andreas M. and Ranaldo, Angelo, Does FOMC News Increase Global FX Trading? (March 1, 2008). CEPR Discussion Paper No. DP6753, Available at SSRN: https://ssrn.com/abstract=1141658

Andreas M. Fischer (Contact Author)

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

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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