FX markets’ reactions to COVID-19: Are they different?
In this paper, we empirically investigate the impact of the COVID-19 pandemic on FX markets. We find important differences between COVID-19 and previous high-risk episodes: the Global Financial Crisis, the Swiss National Bank's removal of the Swiss franc/euro floor, and Brexit. Contrary to thes...
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Veröffentlicht in: | International economics (Paris) 2021-10, Vol.167, p.50-58 |
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Hauptverfasser: | , |
Format: | Artikel |
Sprache: | eng |
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Zusammenfassung: | In this paper, we empirically investigate the impact of the COVID-19 pandemic on FX markets. We find important differences between COVID-19 and previous high-risk episodes: the Global Financial Crisis, the Swiss National Bank's removal of the Swiss franc/euro floor, and Brexit. Contrary to these episodes, the USD did not show any safe haven characteristics during the pandemic. Furthermore, the estimated volatility and non-parametric value-at-risk of three currency portfolios indicate that COVID-19 was not as risky as previous stressful events. We provide evidence that investors could minimize COVID-19 risk by investing in the Canadian dollar and the Japanese yen, and by reducing their exposure to European currencies. |
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ISSN: | 2110-7017 2110-7017 |
DOI: | 10.1016/j.inteco.2021.05.006 |