Introducing False EUR and False EUR exchange rates

The Euro (EUR) is a new currency introduced by the European Community. Its exchange rate is very puzzling. We have invented a false Euro (FEUR) dating back to 1993 and have derived the exchange rates of the FEUR with respect to currencies not belonging to the EUR, i.e., DKK, CHF, JPY and USD. This a llows us to search for correlations between the fluctuations preexisting to the introduction of EUR and present ones in such financial data. The detre nded fluctuation analysis (DFA) statistical method is used. This leads to a ssume a power-law behavior, i.e., a scaling hypothesis, through an exponent alpha. The latter has demonstrated its usefulness for the investigations o f long-range power-law correlations in several types of financial sequences . Our findings show that the alpha exponent interestingly characterizes fra ctional Brownian motion of the currency exchange rates between EUR and DKK over a 25 day interval, and usual Brownian motion otherwise and for the thr ee other investigated exchange rates. We can devise an investment strategy based on the local alpha technique and obtain appreciable gains for the tim e being. (C) 2000 Elsevier Science B.V. All rights reserved.