Intra-Day Seasonality in Foreign Exchange Market Transactions

TL;DR

This study investigates intra-day patterns in foreign exchange transactions, revealing significant seasonal effects on returns and volatilities, with implications for trading strategies and risk management.

Contribution

It provides empirical evidence of intra-day seasonality in FX market transactions and tail outcomes, highlighting patterns under normal and extraordinary conditions.

Findings

Significant intra-day seasonality in returns and volatilities

Seasonality observed in tail outcomes during extraordinary conditions

Patterns consistent across different market conditions

Abstract

This paper examines the intra-day seasonality of transacted limit and market orders in the DEM/USD foreign exchange market. Empirical analysis of completed transactions data based on the Dealing 2000-2 electronic inter-dealer broking system indicates significant evidence of intraday seasonality in returns and return volatilities under usual market conditions. Moreover, analysis of realised tail outcomes supports seasonality for extraordinary market conditions across the trading day.