We study high-frequency exchange rate movements over the sample 1993-2006. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more...

We explain the currency carry trade performance using an asset pricing model in which factor loadings are regime-dependent rather than constant. Empirical results show that a typical carry trade strategy has much higher exposure to the stock market and is mean-reverting in regimes of high FX...

Arbitrage normally ensures that covered interest parity (CIP) holds. Until recently, excess profits, if any, were documented to last merely seconds and reach a few pips. Instead, this paper finds that following the Lehman bankruptcy, these were large, persisted for months and involved strategies...

This paper sheds light on a puzzling pattern in foreign exchange markets: Domestic currencies appreciate (depreciate) systematically during foreign (domestic) working hours. These time-of-day patterns are statistically and economically highly significant. They pervasively persist across many...

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...

This paper develops a liquidity measure tailored to the foreign exchange (FX) market, quantifies the amount of commonality in liquidity across exchange rates, and determines the extent of liquidity risk premiums embedded in FX returns. The new liquidity measure utilizes ultra high frequency data...

In this paper we analyze high-frequency movements in Swiss financial markets in reaction to real-time communication by the Swiss National Bank. Our analysis of central bank communication encompasses official speeches and interviews, not only monetary policy announcements. We examine the...

Arbitrage ensures that covered interest parity holds. The condition is central to price foreign exchange forwards and interbank lending rates, and reflects the efficient functioning of markets. Normally, deviations from arbitrage, if any, last seconds and reach a few basis points. But after the...

We provide a comprehensive study of the liquidity of spot foreign exchange (FX) rates over more than two decades and a large cross-section of currencies. First, we show that FX liquidity can be accurately measured with daily and readily-available data. Second, we demonstrate that FX liquidity...

We study high-frequency exchange rate movements over the sample 1993–2006. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more...