Do Australian and the US macroeconomic news announcements affect the USD/AUD exchange rate? Some evidence from E-GARCH estimations

Abstract This paper examines the effects of scheduled Australian and US macroeconomic announcements on daily USD/AUD exchange rate changes. EGARCH(1,1) models are used to investigate news effects on the conditional mean and volatility of the changes over various time horizons encompassing the announcements. A higher than expected Australian current account deficit announcement depreciated the AUD while an unexpectedly higher Australian GDP growth rate appreciated it on the announcement day during the Australian market trading. The conditional volatility was higher in response to the Australian current account deficit and inflation news, while the retail sales news lowered it. The US announcements, in general, had little effect during the US market trading, however, news effects measured over wider time horizon encompassing the next calendar day's Australian trading turned out to be more significant. Unexpectedly large US trade deficit and unemployment announcements appreciated the AUD while the trade deficit and retail sales news raised the conditional volatility and the unemployment news lowered it.

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