TY  - JOUR
AU  - Lyons,Richard K.
AU  - Rose,Andrew K.
TI  - Explaining Forward Exchange Bias..Intraday
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4982
PY  - 1995
Y2  - January 1995
UR  - http://www.nber.org/papers/w4982
L1  - http://www.nber.org/papers/w4982.pdf
N1  - Author contact info:
Richard K. Lyons
460 Michigan Ave
Berkeley, CA 94707
Tel: 510-642-1059
Fax: 510-642-4700
E-Mail: lyons@haas.berkeley.edu

Andrew K. Rose
Haas School of Business Administration
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-6609
Fax: 510/642-4700
E-Mail: arose@haas.berkeley.edu
AB  - Intraday interest rates are zero.  Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost.  This tactic might seem especially attractive in times of crisis, since it suggests an immunity to the central bank's interest rate defense.  In equilibrium, however, buyers of the vulnerable currency must be compensated on average with an intraday capital gain as long as no devaluation occurs.  That is, currencies under attack should typically appreciate intraday.  Using data on intraday exchange rate changes within the EMS, we find this prediction is borne out.
ER  -