Attractive and non-attractive currencies

In the foreign exchange market, time-varying transaction costs and interest rates may define set of attractive currencies for investors. Our study shows that when are attractive, they tend to deviate from uncovered rate parity comove with global stochastic discount factor (SDF). Inversely, non-attractive, conform more closely do not SDF. As a consequence, both investors policy makers want know status currency as it conveys important information about future return currency. We illustrate our point in sample including 26 over period 1985--2017.