Intraday volatility in the Taipei FX market

This paper characterizes the volatility in the Taipei foreign exchange (FX) market based on a 4-year sample of 15-minute NTD (New Taiwan dollar)/USD exchange rates from 1996 through 1999. To identify the pattern of intraday volatility in NTD/USD exchange rate changes, the impacts of scheduled macroeconomic news releases in Taiwan and the U.S. are considered. In this paper, the periodic GARCH (P-GARCH) model and the dummy variable approach are combined together to capture the more complicated periodic structure of the intraday volatility in the NTD/USD exchange rate changes. The estimation results suggest that the doubly U-shaped pattern in the Taipei FX market, associated with separate morning and afternoon sessions due to a 2-hour lunch break, can only be partly explained by the scheduled news announcements.