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Abstract
The cross-correlations between the exchange rate fluctuations of 74 currencies over
the period 1995-2012 are analyzed in this paper. The eigenvalue distribution of the
cross-correlation matrix exhibits a bulk which approximately matches the bounds predicted
from random matrices constructed using mutually uncorrelated time-series. However,
a few large eigenvalues deviating from the bulk contain important information about
the global market mode as well as important clusters of strongly interacting currencies.We
reconstruct the network structure of the world currency market by using two different
graph representation techniques, after filtering out the effects of global or market-wide
signals on the one hand and random effects on the other. The two networks reveal complementary
insights about the major motive forces of the global economy, including the identification
of a group of potentially fast growing economies whose development trajectory may
affect the global economy in the future as profoundly as the rise of India and China
has affected it in the past decades.
Comments 16 pages, 6 figures, to appear in Proceedings of International
Workshop on "Econophysics of Agent-Based Models" (Econophys-Kolkata VII), Nov
8-12, 2012