We relate the risk characteristics of currencies to measures of physical, cultural, and institutional distance. The currencies of countries which are more distant from other countries are more exposed to systematic currency risk. This is due to a gravity effect in the factor structure of...

What can we learn from the high-frequency responses in bond and currency markets to the recent tariff announcement about the status of the U.S. dollar as the global reserve currency? The dollar depreciated by 6.5% after April 1 in spite of rising U.S. interest rates and market volatility, which...