A NOTE ON ECONOMIC-NEWS AND INTRADAY EXCHANGE-RATES

Measured with intraday data in a 1987-1991 sample period, the mark/dol lar exchange rate was affected by unanticipated information about the trade deficit and the consumer price index. The exchange rate showed n o significant response to news about money supply, industrial producti on, the producer price index, or unemployment. Trade deficit surprises were negatively correlated with the value of the dollar as expected. CPI surprises showed a positive correlation, as would be predicted by sticky price models of exchange rates. The market's reaction to the 8: 30am trade deficit announcement was complete by 9am, but the market's response to the CPI announcement was not as immediate. No significant reaction had occurred by 9am, and the spot price did not fully digest the information until Ipm. Significant responses were present in the 9 am, 11am, and noon hours. Alternate measures of currency returns faile d to explain this delayed response.