پاسخ فرکانس بالا از نرخ ارز به اعمال سیاست های پولی و بیانیه ها

This paper investigates the impact of US monetary policy on the level and volatility of exchange rates using an event study with intraday data for five currencies (the US dollar exchange rate versus the euro, the Canadian dollar, the British pound, the Swiss franc, and the Japanese yen). I construct two indicators of news about monetary policy stemming separately from policy decisions and from balance of risk statements. Estimation results show that both policy decisions and communication have economically large and highly significant effects on the exchange rates, with the surprise component of statements accounting for most of the explainable variation in exchange rate returns in response to monetary policy. This paper also shows that exchange rates tend to absorb FOMC monetary surprises within 30–40 min from the announcement release

There is a considerable amount of interest in understanding the interactions between monetary policy and asset prices. This relationship is an important topic for several reasons. From the perspective of monetary policy makers, since monetary policy impacts the real economy through financial markets understanding the link between central bank announcements and asset prices is crucial to understand the policy transmission mechanism. From an asset pricing perspective, as evidenced by the extensive attention that the Federal Reserve receives in the financial press, market participants are obviously equally interested in estimating the response of asset prices to changes in monetary policy. The purpose of this work is to assess the relationship between US Federal Reserve’s (henceforth Fed) monetary policy and the US dollar exchange rate. This paper contributes to the existing literature in two main aspects. First, this work investigates the real-time effect on exchange rates of a new type of news item, specifically the information originating from the Federal Open Market Committee (FOMC) balance of risk statements in which the outlook for the future monetary policy stance is conveyed. Second, this paper considers high-frequency exchange rate data for five currencies (the US dollar exchange rate versus the euro, the Canadian dollar, the British pound, the Swiss franc, and the Japanese yen) and a long time series of intraday data – spanning up to June 2007. By using high-frequency data, this paper seeks to more fully and precisely characterize the response of exchange rates to monetary policy shocks. On the one hand, the use of tick data and a narrow event window around FOMC meetings allows better control for (i) the endogeneity-reverse causality problem, and (ii) the omitted variables problem: short-term interest rates and the exchange rate may be influenced by each other and by other common variables, such as the release of scheduled macroeconomic announcements. On the other hand, this paper can also examine the speed of the response of exchange rates to FOMC decisions and statements. The main findings of the paper can be summarized as follows. First, I show that the surprise components of both Fed’s monetary policy actions and statements have economically important and highly significant effects on the US dollar exchange rates. However, the news stemming from Fed’s statements matters more for the determination of exchange rates than news about actual monetary policy decisions. For instance, I find that around 80% of the explainable variation in exchange rate returns in response to the Fed’s monetary policy is due to unanticipated statements rather than to unexpected changes in the federal funds rate target. I interpret this striking finding as indicating that exchange rates are strongly influenced by the expected path of policy. Second, I precisely characterize how exchange rates adjust to the Fed’s monetary policy. The volatility of exchange rate returns peaks at the FOMC announcement, and remains significantly higher than non-announcement days for about 40 min to 1 h. Moreover, there is a sharp spike in the impact of monetary policy announcements in the 10 min following the event, and monetary news is fully incorporated in about 30–40 min. Several papers have recently used high-frequency data to examine the response of asset prices to macroeconomic news and monetary decisions.1 Two recent contributions examine the impact of the US Federal Reserve’s monetary policy on asset prices as I do in this study. Faust et al. (2007) use intraday data to examine the response of exchange rates to scheduled macroeconomic announcements and Fed decisions.2 The present paper shares the finding that public news has a significant impact both on the level and volatility of asset prices in the aftermath of announcements, and goes one step further by showing that the surprise component of FOMC statements, as opposed to the surprise component of its policy decisions, greatly adds to our understanding of the response of exchange rates to monetary policy announcements. In other words, I show that two factors are required to capture adequately the effects of the Fed monetary policy on exchange rates: the current federal funds rate target and the Fed’s communication about the future monetary policy path. The role of central bank communication for the conduct of monetary policy-making has recently received increasing attention in the academic literature both theoretically and empirically (see Blinder et al. (2008) for more details). In this respect, Gurkaynak et al. (2005) use changes in money market rates to construct multi-dimensional indicators of monetary policy news, capturing both central bank communication and monetary policy decisions. Then they assess the yield curve effects and stock market reactions to FOMC announcements using high-frequency data. This paper extends their work along two dimensions. First, I consider not only a different asset class, high-frequency exchange rate data, but also a more up-to-date sample period. Second, the identification of the surprise component of central bank statements is different. More specifically, instead of using a principal components, I employ content analysis to classify the tone of the statement and a forecasting regression to identify the surprise component of the Fed’s announcement. Another strand of the literature (see for instance Andersen et al., 2008) estimates a time series model to investigate the response of the conditional mean of exchange rate returns to macroeconomic announcements. In this paper I employ a pure event study methodology, only examining a short period around the release of the FOMC policy announcement while abstracting from noise caused by other events as well as intra-daily volatility patterns. The rest of the paper is organized as follows. Section 2 starts by describing the dataset. Section 3 contains the discussion of the empirical results of the impact of the Fed monetary policy and news shocks on the US dollar exchange rate, and looks at the speed of exchange rate responses to FOMC announcements. Section 4 examines the robustness of the results. Finally, Section 5 concludes.

This paper tries to shed some light on the link between monetary policy decisions and the US dollar exchange rate response. More specifically, it asks to what extent central bankers can influence exchange rates through policy statements about the expected path of future policy rates as opposed to current monetary decisions. I find that on monetary policy committee meeting days the Fed can drive the exchange rate by using either monetary policy or news shock, i.e. the difference between what the central bank does (or announces) compared to what the market expects the central bank to do (or announce). Both the surprise components of both monetary policy actions and communication have large and highly significant, similar effects on exchange rates. According to my estimates, an unanticipated 25-basis-point cut in the federal funds target rate is associated on average with a 0.5% depreciation of the exchange value of the dollar against foreign currencies. An unexpected downward revision in the tone of the statement from neutral to dovish is associated with about 0.3% decline in the US dollar. However, the news stemming from Fed’s statements matters more for the determination of exchange rates than news about actual monetary policy decisions. In sum, my findings suggest that the surprise component of central bank statements greatly adds to our understanding of the response of exchange rates to monetary policy. In other words, one key insight that follows from this work is that previous studies that focused only on the FOMC’s decisions regarding the current federal funds rate target have been missing by far the most important component of monetary policy, especially in recent years when market participants have often well anticipated target funds rate changes. However, note that an intraday event study analysis of relatively few events cannot attempt to explain overall exchange rate movements (indeed Table 4 and Table 5 show that the monetary policy and news shock can only explain about 15–22% of the variation in the US dollar exchange rate in a narrow window surrounding FOMC announcements). Moreover, monetary policy matters for exchange rate determination in more ways than merely through infrequent, actual policy changes. For instance, Fatum and Scholnick (2006) show that continuous day-to-day changes in expectations of future monetary policy are associated in a highly significant and systematic way with day-to-day changes in exchange rates even when no actual monetary policy changes occur.