THE COVID-19 INFORMATION IMPACT ON MOVEMENT AND VOLATILITY OF ASEAN-5 CURRENCY

Abstract

The rapid and massive spread of COVID-19 has a major impact on a country's economy, including ASEAN countries. This research aims to examine the impact of the COVID-19 outbreak information on exchange rate movements and currency exchange rate volatility of ASEAN-5 countries. This study employs data on the number of infection cases to measure COVID-19 information. The research period begins with the first case that occurred in each ASEAN-5 country until December 31st, 2020, using the GARCH research method. The results indicate that the COVID-19 outbreak information had a significant effect on exchange rate volatility but had no effect on the movement of the ASEAN-5 exchange rate in one day. Meanwhile, in five days, the COVID-19 information did not significantly affect the movement and volatility of the exchange rates of ASEAN-5 countries. The influence of COVID-19 outbreak information on the ASEAN-5 exchange rate, which is stronger in one day than five days supports the theory of exchange rate dynamics. This finding implies that COVID-19 information affects the exchange rate volatility of ASEAN-5 countries in the short term. For this reason, investors can be wiser in managing their investment portfolios, and regulators can implement policies to reduce volatility in the foreign exchange market.

Keywords

• exchange rate; garch; covid-19; exchange rate dynamics