'Once-in-a-generation' yen volatility in 1998: Fundamentals, intervention, and order flow

Jun Cai*, Stephen Y L Cheung, Raymond S.K. Lee, Michael Melvin

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

71 Citations (Scopus)


The dramatic yen/dollar volatility of 1998 has been popularly ascribed to order flow driven by changing tastes for risk and hedge-fund herding on unwinding yen 'carry trade' positions rather than fundamentals. High-frequency evidence of shifting fundamentals is provided by a comprehensive list of macroeconomic announcements. News is found to have significant effects on volatility, but order flow may play a more important role. Since portfolio shifts are revealed to the market through trading, the results are consistent with order flow playing a significant role in the revelation of private information and associated exchange rate shifts.

Original languageEnglish
Pages (from-to)327-347
Number of pages21
JournalJournal of International Money and Finance
Issue number3
Publication statusPublished - Jun 2001

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • C22
  • Central bank intervention
  • Exchange rate volatility
  • F31
  • G14
  • G15
  • News announcements
  • Order flow
  • Private information


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