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Keywords:

  • Filter rule;
  • Foreign exchange;
  • Market efficiency

The efficiency of price determination in the Australian dollar (AUD) foreign currency market is of significant concern for national economic policy and well-being. This paper tests efficiency by assessing the profitability of technical trading rules applied to spot exchange rates. We show that trading-rule profits have tended to evaporate across the two decades since the floating of the exchange rate. As a check on the possible ‘US dollar effect’, we include three other major currencies in the analysis.