  The local Hurst exponent, a measure employed to detect the presence of
dependence in a time series, may also be used to investigate the source of
intraday variation observed in the returns in foreign exchange markets. Given
that changes in the local Hurst exponent may be due to either a time-varying
range, or standard deviation, or both of these simultaneously, values for the
range, standard deviation and local Hurst exponent are recorded and analyzed
separately. To illustrate this approach, a high-frequency data set of the spot
Australian dollar/U.S. dollar provides evidence of the returns distribution
across the 24-hour trading day with time-varying dependence and volatility
clearly aligning with the opening and closing of markets. This variation is
attributed to the effects of liquidity and the price-discovery actions of
dealers.
