On the predictability of daytime and night-time yen/dollar exchange rates

ABSTRACT

This article first shows that the yen/dollar rate tended to appreciate in Japan daytime but to depreciate in Japan night-time in the 2000s. The result is very paradoxical because the asymmetry implies that the intra-daily yen/dollar rate had predictable stochastic trends in the 2000s. The article then investigates whether lagged dependent variables and various external shocks were responsible to the asymmetric feature. We find that once we control the effects of lagged dependent variables and external shocks, the daytime yen/dollar rate tended to appreciate when it had appreciated on the day before, while the night-time yen/dollar rate tended to depreciate when it had depreciated on the day before.

KEYWORDS:

• Yen/dollar exchange rate
• intra-daily data
• predictability
• stochastic trend

JEL CLASSIFICATION:

• F31
• F30

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ Fukuda (2015) finds that this feature became conspicuous after mid-November 2012 when Shinzo Abe had been expected to be elected as Japanese Prime Minister.

² Iwatsubo and Kitamura (2009) explored related issues based on the data from 1987 to 2007. But they did not explore the asymmetry. It is likely that the asymmetry is a specific feature in the 2000s.

³ We included two intervention dummies. One is a dummy for the Ministry of Finance’s intervention from 2000 to 2004. The other is a dummy for the intervention from 2010 to 2011. No intervention took place from 2005 to 2009.

Additional information

Funding

This research was supported by the Ministry of Education, Science, Sports and Culture, Grant-in-Aid for Challenging Exploratory Research 15K13003.