Working Paper: CEPR ID: DP7249
Authors: Angelo Ranaldo; Paul Sderlind
Abstract: We study high-frequency exchange rate movements over the sample 1993-2007. 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 volatile. In these situations, the franc appreciates also against the other currencies, while the pound depreciates. The safe haven properties correspond to the carry trader's losses. They materialize over different time granularities (from a few hours to several days), during both "ordinary days" and crisis episodes and show some non-linear features.
Keywords: Crisis Episodes; High-Frequency Data; Nonlinear Effects
JEL Codes: F31; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Negative stock market returns (G12) | Appreciation of Swiss Franc (CHF) against US Dollar (USD) (F31) |
| Increase in US bond prices (G12) | Appreciation of Swiss Franc (CHF) against US Dollar (USD) (F31) |
| Heightened currency market volatility (F31) | Appreciation of Swiss Franc (CHF) against US Dollar (USD) (F31) |
| Negative stock market returns (G12) | Appreciation of Euro (EUR) against US Dollar (USD) (F31) |
| Negative stock market returns (G12) | Appreciation of Japanese Yen (JPY) against US Dollar (USD) (F31) |
| Market downturns (E32) | Appreciation of safe-haven currencies (F31) |
| Market downturns (E32) | Losses in carry trade positions (F32) |
| Appreciation of safe-haven currencies (F31) | Negative correlation with international equity markets (G15) |