What impacts emerging foreign currencies more? US news or domestic news?

Fed economists Fang Cai, Hyunsoo Joo, and Zhiwei Zhang in their new paper say:

This paper utilizes a unique high-frequency database to measure how exchange rates in nine emerging markets react to macroeconomic news in the U.S. and domestic economies from 2000 to 2006. We find that major U.S. macroeconomic news have a strong impact on the returns and volatilities of emerging market exchange rates, but many domestic news do not. Emerging market currencies have become more sensitive to U.S. news in recent years. We also find that market sentiment could sway the impact of news on these currencies systematically, as good (bad) news seems to matter more when optimism (pessimism) prevails. Market uncertainty also interacts with macroeconomic news in a statistically significant way, but its role varies across currencies and news.

In sum foreign currency of the selected emerging econ reacts more to US eco data/ news compared to domestic eco data/ news. The researched countries are: Czech Republic, Hungary, Indonesia, Koreea, Mexico, Poland, South Africa, Thailand and Turkey. Barring Thailand and Turkey, all currencies react more strongly to US news and the connections is getting stronger. They add it is first such paper to track the impact on these 9 countries

I am not surprised by the results. The oppposite results would have been more surprising. Seeing the way Indian markets react to everything US, the results are expected to be same for other emerging economies.  Similar paper on India would be highly welcome.

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