The behavior of the foreign currency market

The interaction between the real exchange rate and natural resources is a common phenomenon because these resources are usually used domestically and exported. These exports lead to changes in the real exchange rate that then influence macroeconomics factors. I examine whether announcements related to expected and actual natural gas discoveries off the coast of Israel affect the real exchange rate, and whether investors can utilize this information to make abnormal profits. To accomplish this goal, I use an intraday event study approach to analyze the fluctuations in the real intraday exchange rate between the Israeli shekel and the US dollar for 2009-2017 and media announcements related to the gas discoveries published during this period. The results reveal that announcements related to gas discoveries did affect the real exchange rate and caused the appreciation of the shekel. Investors who analyzed the announcements could achieve abnormal returns in the foreign exchange market.<br>