Arbitrage Opportunities in Dollar Trading Due to Unexpected Political Events: An Empirical Note

Abstract

We examine the impact of U.S. Government partial shutdown in 2013 on the values of the Dollar Index, the British Pound and the Euro. We show that the value of the Dollar index did not decline during the shutdown period. There was a significant drop in the value of the Dollar index and a corresponding increase in the values of the British Pound and the Euro on October 17, 2013, following the signing of the agreement creating arbitrage opportunities for market participants because of the interaction of political risk on currency risk.