Foreign exchange markets, climate risks and contextual news: An intraday analysis
This paper examines intraday currency returns and volatility driven by macroeconomic news, COVID-19 events, vaccine developments, and climate risk.
What it examines
The study examines how factors such as COVID-19 outbreaks, vaccine news, government actions, and climate risks affect foreign exchange returns and volatility. It uses high-frequency 5-minute data and both static and time-series methods to analyze economic and health-related news impacts on currency markets.
What it concludes
The study finds that vaccine announcements and climate risks significantly influence market volatility and currency strength during crises. Results suggest these insights can be used in financial decision-making, risk management, and policy design. Future research may refine these models and further explore implications for international finance and market stability.
Evidence objects
A study reveals that before COVID-19 currency returns followed traditional macroeconomic news, but during the pandemic, market focus shifted to pandemic-specific events, with vaccine announcements surprisingly increasing volatility amid uncertainty.
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Innovatively, researchers integrate high-frequency $5$-minute intraday data and introduce climate risk using factory orders, contrasting scheduled macroeconomic releases with unscheduled pandemic developments like new cases, deaths, and governmental responses worldwide.
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The comprehensive analysis uncovers a major shift in investor behavior toward safe-haven currencies, demonstrating diminished impact from macro news during the pandemic and noting limitations in data sharing and generalizability.
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This paper integrates climate risks and news into FX market analysis. It employs econometric time series methods to examine $r$ returns and volatility $\sigma$, providing insights compared to conventional approaches. The originality and novelty of this synthesis make it a compelling read for scholars in quantitative finance and climate impact.
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Raw abstract and provenance
This paper examines the dynamics of the foreign exchange market, focusing on the impact of macroeconomic, climate risk, and COVID-19 pandemic-related news on currency returns and volatility. Our findings show that prior to the pandemic, currency returns were mainly driven by macroeconomic news, but the onset of COVID-19 shifted attention to pandemic-related news. Vaccine-related announcements consistently increased volatility across markets, reflecting heightened uncertainty. Additionally, climate risk was found to strengthen the four major currencies relative to the US dollar. Finally, the study highlights context-specific effects, with certain indicators losing relevance while others gained prominence during the pandemic.
Source row: 912 · abstract type: unknown