Abstract:
This study examines the response of exchange rate of Thai Baht vis-a-vis U.S. dollar to macroeconomic news of U.S. and Thailand during the floating exchange period from July 1997 to October 2000. Compared to previous, this study attempts, for the first time, to include the news from U.S. macroeconomic data into the news model of exchange rate determination. The new is associated with the unexpected component of the monthly release of five U.S. macroeconomic variables and five Thailand macroeconomic variables. The main objective of this study is to investigate whether an exchange rate response to the economic news when the release data are announced in the market. This study would also provide a better understanding on the exchange rate determination related to the macroeconomic news to investors, exporters, and importers. For U.S. news, the results suggest that the baht/dollar exchange rate does react to positive unemployment news in the monthly model and react to small industrial production index news in daily model. For Thailand, Producer Price Index (PPI) and Private Consumptions (PC) have an impact on an exchange rate movement in daily model while positive Consumer Price Index (CPI) and small Manufacturing Production Index news affect exchange rate in the monthly model. This study supports the hypothesis that macroeconomic "news" does have an impact to an exchange rate. However, the impact might be seen as quantitatively small. As a result, this study can actively facilitate economic agents on how to rationally select which news information that yields the most impact on the baht/dollar exchange rate movement
