US Interest Rates VS Currencies

Posted on Mi 29 August 2007 in misc • 1 min read

  • Forex
  • Trends tags: [] meta: _aioseop_keywords: Currency, Macro Model, Timing dsq_thread_id: '181042141' author:

    GBPUSD-FFI have some issues with Christian’s post, Should the Fed Ease for the Sake of the USD, and wanted to analyze his hypothesis that US interest rates have no correlation to currencies over the long term.

    I downloaded daily closing data for the GBP, CHF, JPY, and the 90 day Fed Fund Rate index from late 1989 through yesterday. Note, a Fed Fund Rate index of 100 = 0% interest rate and an index number of 95 = 5% interest rate.

    CHFUSD-FF

     

    Although my data doesn’t reach back past 1989, I do see correlations to the interest rates and the various currencies. Most of the time there are lagged effects in the currencies as the US interest rates work their way into the system. This little exercise might have helped me in finishing out some macro-economic neural net models for my currency trading.JPYUSD-FF

    Although I disagree with your analysis Christian, thanks for the brain tease!