Asymmetric and time-frequency network of currency markets

We explore the asymmetric volatility network of global currency markets over the short- and long-run during the COVID-19 pandemic. We use the quantile coherency approach of Baruník and Kley (2015) to estimate the network connectedness, followed by the partial quantile coherency of Junior, Mullokandov, and Kennett (2015) to depict our results. Our results indicate asymmetric behavior of volatility network in global currency markets with regards to volatility, market conditions, and investment horizons. In the short run, the negative volatility connectedness is the highest under bearish market conditions. Volatility networks are mainly driven by developed currency markets in the Americas, Europe, and Asia, marked by geographical proximity, and strengthened during COVID-19 pandemic. Currencies such as the Thai Baht, Turkish Lira, Chilean Peso, and Colombian Peso show disentangled behavior, which suggests their hedging and diversification potential.