Abstract
The current study examines short-term abnormal returns of eight major currencies including EUR/USD, GBP/USD, USD/AUD, USD/CAD, USD/CHF, USD/CNY, USD/JPY, and USD/SEK in response to the evolution of the COVID-19 pandemic using event study approach in three different scenarios. Firstly, short-term abnormal returns of major currencies are estimated on the day of World Health Organization’s (WHO) announcement declaring COVID-19 as a pandemic. Secondly, they are estimated on the day of the announcement of the first confirmed case of COVID-19 in the respective country. Thirdly, they are estimated on the day of the announcement of the first death from COVID-19 in each country. The results provided evidence that major currency investors earned positive returns in these three different scenarios. The implications of the current study are more important than anticipated. Government policymakers, foreign exchange market regulators, and foreign exchange market participants can anticipate short-term returns while establishing foreign exchange policies, designing rules and regulations, and finalizing trading and hedging strategies, respectively, in situations such as the current COVID-19 pandemic. 
 Received Date: September 20, 20202 Last Received: October 23, 2020 Acceptance: November 13, 2020
Highlights
Events such as the COVID-19 pandemic evolve unpredictably and remain uncontrollable, at least, for a certain length of time
The situation became bleak when World Health Organization (WHO) set up the Incidental Management Support Team (IMST) and made it operational on January 01, 2020 on an emergency footing to deal with an outbreak on three levels of organization, that is, organization level, regional headquarter level, and country level, respectively
Short-term abnormal returns of major currencies including EUR/USD, GBP/USD, USD/AUD, USD/CAD, USD/CHF, USD/CNY, USD/JPY, and USD/SEK are estimated after the announcement of WHO declaring COVID-19 as a pandemic on March 11, 2020. They are estimated on the day of the announcement of the first confirmed case of COVID-19 in the respective country
Summary
Events such as the COVID-19 pandemic evolve unpredictably and remain uncontrollable, at least, for a certain length of time. Major foreign exchange rates have remained less volatile during the COVID-19 pandemic as compared to their volatility during the Global Financial Crisis 2008-09 (Gunay, 2020b), COVID-19 pandemic still fanned instability in the international forex market that in turn is reducing the profitability of international trade and operations (Saunders & Cornett, 2011) This crisis was triggered on December 31, 2019 when Wuhan Municipal Health Commission, China reported clusters of pneumonia in Wuhan, Hubei caused by a coronavirus. After reporting on social media, WHO declared COVID-19 outbreak on January 05, 2020 in Wuhan and issued a comprehensive worldwide package of technical guidance on detecting, testing, and managing potential cases through WHO representatives in various countries on January 10, 2020 These precautionary measures and guidelines were based on the experience with Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS). SARS damaged the world economy and inflicted a loss of around USD 100
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