Asymmetric impact of the COVID-19 pandemic on foreign exchange markets: Evidence from an extreme quantile approach

Abstract

This study analyzes asymmetric transmission from the COVID-19 pandemic to major foreign exchange markets from 2 January 2020 to 2 June 2022. This paper contributes to the literature by investigating how the impact of COVID-19 on currency markets co-moves across market conditions and investment horizons. The article uses the recently developed cross-quantilogram framework to achieve this, which quantifies the cross-quantile dependency across time series without any moment condition requirement. The findings demonstrate that changes in the total daily global confirmed cases of COVID-19 can forecast changes in the currency markets under all market circumstances. These findings have significant implications for global investors and policymakers.