Recurrence plots of exchange rates of currencies

TL;DR

This paper demonstrates that recurrence plots can effectively analyze currency exchange rates, revealing oscillation periods, random walks, and responses to news through texture transitions, using Euro exchange rate data.

Contribution

It introduces the application of recurrence plots to characterize currency exchange rate dynamics and their responses to news and events.

Findings

Recurrence plots reveal oscillation and random walk behaviors.

Texture transitions in plots indicate responses to news.

Analysis applied to Euro exchange rate data.

Abstract

Used to investigate the presence of distinctive recurrent behaviours in natural processes, the recurrence plots can be applied to the analysis of economic data, and, in particular, to the characterization of exchange rates of currencies too. In this paper, we will show that these plots are able to characterize the periods of oscillation and random walk of currencies and enhance their reply to news and events, by means of texture transitions. The examples of recurrence plots given here are obtained from time series of exchange rates of Euro.