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False EUR exchange rates vs. DKK, CHF, JPY and USD. What is a strong currency?

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  • K. Ivanova
  • M. Ausloos

Abstract

The Euro (EUR) has been a currency introduced by the European Community on Jan. 01, 1999. This implies eleven countries of the European Union which have been found to meet the five requirements of the Maastricht convergence criteria. In order to test EUR behavior and understand various features, we have extrapolated the EUR backwards and therefore have obtained a {\it false euro} (FEUR) dating back to 1993. We have derived the exchange rates of the FEUR with respect to several currencies of interest not belonging to the EUR, i.e., Danish Kroner (DKK), Swiss Franc (CHF), Japanese Yen (JPY) and U.S. Dollar (USD). We have first observed the distribution of fluctuations of the exchange rates. Within the {\it Detrended Fluctuation Analysis} (DFA) statistical method, we have calculated the power law behavior describing the root-mean-square deviation of these exchange rate fluctuations as a function of time, displaying in particular the JPY exchange rate case. In order to estimate the role of each currency making the EUR and therefore in view of identifying whether some of them mostly influences its behavior, we have compared the time-dependent exponent of the exchange rate fluctuations for EUR with that for the currencies that form the EUR. We have found that the German Mark (DEM) has been leading the fluctuations of EUR/JPY exchange rates, and Portuguese Escudo (PTE) is the farthest away currency from this point of view.

Suggested Citation

  • K. Ivanova & M. Ausloos, 2001. "False EUR exchange rates vs. DKK, CHF, JPY and USD. What is a strong currency?," Papers cond-mat/0103033, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0103033
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    References listed on IDEAS

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    1. M. Ausloos & K. Ivanova, 2001. "False Euro (FEUR) exchange rate correlated behaviors and investment strategy," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 20(4), pages 537-541, April.
    2. Gençay, Ramazan & Selçuk, Faruk & Whitcher, Brandon, 2001. "Scaling properties of foreign exchange volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 289(1), pages 249-266.
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    Cited by:

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    3. Marcel Ausloos, 2012. "Econophysics in Belgium. The first (?) 15 years," Papers 1212.1946, arXiv.org.
    4. Sitabhra Sinha & Uday Kovur, 2013. "Uncovering the network structure of the world currency market: Cross-correlations in the fluctuations of daily exchange rates," Papers 1305.0239, arXiv.org.
    5. Boilard, J.-F. & Kanazawa, K. & Takayasu, H. & Takayasu, M., 2018. "Empirical scaling relations of market event rates in foreign currency market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 1152-1161.
    6. Manavi, Seyed Alireza & Jafari, Gholamreza & Rouhani, Shahin & Ausloos, Marcel, 2020. "Demythifying the belief in cryptocurrencies decentralized aspects. A study of cryptocurrencies time cross-correlations with common currencies, commodities and financial indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 556(C).
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    9. Matsushita, Raul & Gleria, Iram & Figueiredo, Annibal & Da Silva, Sergio, 2007. "Are Pound and Euro the Same Currency? - Updated," MPRA Paper 1981, University Library of Munich, Germany.
    10. Celeste, Valerio & Corbet, Shaen & Gurdgiev, Constantin, 2020. "Fractal dynamics and wavelet analysis: Deep volatility and return properties of Bitcoin, Ethereum and Ripple," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 310-324.

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