Daily Currency Exchange Pattern

Do currency exchange returns exhibit reliable daily patterns? In their March 2012 paper entitled “Intraday Patterns in FX Returns and Order Flow”, Francis Breedon and Angelo Ranaldo investigate currency exchange returns during local trading hours and the balance of the day. They analyze six exchange rates: euro-U.S. dollar; U.S. dollar-yen; Great Britain pound-U.S. dollar; euro-yen; U.S. dollar-Swiss franc; and, Australian dollar-U.S. dollar. Using hourly currency exchange spot bid, ask and execution prices and order flow data for January 1997 through May 2007 (mostly excluding weekends but including holidays) converted to New York time, they find that: (more…)