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Informed trading in foreign exchange futures: Payroll news timing

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  • Park, Yang-Ho

Abstract

This paper studies informed trading about U.S. payrolls in the foreign exchange (FX) futures market. I find that speculators such as hedge funds are more likely to be sellers than buyers of FX futures ahead of good U.S. payroll news and thus appear to have earned significant gains around payroll announcements. In contrast, hedgers—in particular, dealers—appear to have provided liquidity to speculators. I show that mimicking speculators’ FX exposures around payroll announcements can add a large economic gain to various reference portfolios. My analysis also uncovers that information in FX trading is long-lived and differs along the U.S. business cycle.

Suggested Citation

  • Park, Yang-Ho, 2022. "Informed trading in foreign exchange futures: Payroll news timing," Journal of Banking & Finance, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:jbfina:v:135:y:2022:i:c:s037842662100323x
    DOI: 10.1016/j.jbankfin.2021.106372
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    More about this item

    Keywords

    Foreign exchange; Informed trading; Macroeconomic announcements; Futures market; U.S. dollar;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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