Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market

2018 ◽  
Vol 19 (4) ◽  
pp. 902-920
Author(s):  
Abolaji Daniel Anifowose ◽  
Izlin Ismail ◽  
Mohd Edil Abd Sukor
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Empirical Test ◽  
Order Flow ◽  
Exchange Market ◽  
Vector Autoregressive ◽  
Exchange Rate Dynamics ◽  
Currency Exchange ◽  
Exchange Rate Movements

This article presents empirical test results of Malaysian foreign exchange market microstructure assessment of exchange rate dynamics. We apply vector autoregressive (VAR) model to estimate the influential role of currency order flow in the determination of the currency exchange rate for the Malaysian ringgit (MYR) against the US dollar (USD). We investigate whether currency order flow captures the movements of exchange rate of MYR against USD, and how the long-term and short-term components impact the relative estimation of MYR in the international market. We, construct a measure of order flow in the Malaysian foreign exchange market to reflect the pressure of currency excess demand. Our focus is on the cumulative currency order flow and the exchange rate relationship of MYR and USD. A hybrid model of order flow and exchange rate dynamics proposed by Evans and Lyons (2002a) is applied to the Malaysian foreign exchange market (MYR/USD) to analyse a dataset of every 15-minute currency order flow and exchange rate movements from January 2010 to December 2015. Our dataset has unique features in terms of the quality of the data, extensive period and precise high frequency. Our results show that currency order flow explains an important portion of the movements in the MYR–USD exchange rate.

The Effectiveness of Fed Intervention on the USD/DM Foreign Exchange Market

2006 ◽  
Vol 6 (2) ◽  
pp. 1850088 ◽  
Author(s):  
Zhaodan Huang ◽  
Stephen Neun
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Policy Option ◽  
Exchange Market ◽  
Event Window ◽  
Study Approach ◽  
Exchange Rate Movements ◽  
The Exchange Rate ◽  
Exchange Rate Level

This study empirically examines the effectiveness of Fed intervention on the USD/DM exchange market using an event study approach. The event window is defined as 4 (8) days prior/post an intervention. Based on the empirical analysis, the results show that when the Fed follows an "against the wind" policy, exchange rate movements are smoothed and may switch direction. The results are robust and hold for different event window definitions and sample ranges. To test whether the results are due to the exchange rate movement itself, we conduct a simple test using customer trades by the Fed. The results do not exhibit a systematic pattern. We also find that a joint intervention has a stronger impact on the exchange rate level when the Fed buys US dollars. The policy implication of our findings is that intervention in foreign exchange markets on the part of the Fed to impact the value of the US dollar is a viable policy option.

Understanding Indonesia’s exchange rate behavior

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
R. Eki Rahman
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Order Flow ◽  
Flow Data ◽  
Exchange Market ◽  
Data Set ◽  
Foreign Investors ◽  
Content Type ◽  
Rate Behavior

Purpose The main aim of this paper is to examine the mechanism of determining the exchange rate of the US dollar against the Indonesian rupiah (USD/IDR) by market players to manage the USD/IDR exchange rate stability. Thus, this study is expected to provide a better understanding of the determinants of the USD/IDR, given that the data set completely encompasses all the USD/IDR transactions in the Indonesian foreign exchange market. Order flow data used in this study cover all transactions on the USD/IDR conducted by domestic residents including both individuals and corporations and foreign investors in the Indonesian foreign exchange market. Design/methodology/approach This study covers the data set over the period January 3, 2011 to December 31, 2015, and the vector autoregression and autoregressive distributed lag models are used in examining the research questions. More particularly, in this study, the author examines whether the net total domestic individual transactions (DOVA), net total domestic corporation transactions (KOVA), net total foreign investor transactions (IOVA), Asian Dollar Index (ADXY), non-deliverable forward (NDF) for USD/IDR and Volatility Index (VIX) are statistically significant determinants of the USD/IDR exchange rate. Findings Overall, this study suggests that in the short run, lag of the USD/IDR exchange rate or inertia level, lag of the IOVA, lag of the NDF of the USD/IDR exchange rate and lag of the ADXY are statistically significant determinants of the USD/IDR. On the other hand, in the long run, DOVA, NDF and ADXY are found to be statistically significant determinants of USD/IDR. This study also found that there is a market leader and asymmetric information among market players in the Indonesian foreign exchange market, and their USD/IDR exchange rate level becomes a reference for other market players when conducting transactions with each other. Originality/value The paper is original along two lines. First, the data set used in this study is unique. It encompasses all the USD/IDR transactions in the Indonesian foreign exchange market. The order flow data used in this study cover all transactions on the USD/IDR conducted by domestic residents (includes both individuals and corporations) and foreign investors in the Indonesian foreign exchange market. Such an approach has not been used previously to study the exchange rate behavior in an emerging market. Second, there is limited knowledge on Indonesia’s exchange rate dynamics. This study fills this gap.

Dynamics of exchange rate determination and currency order flow in the Thailand foreign exchange market

2017 ◽  
Vol 10 (2) ◽  
pp. 143-161 ◽  
Author(s):  
Abolaji Daniel Anifowose ◽  
Izlin Ismail ◽  
Mohd Edil Abd Sukor
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Emerging Economies ◽  
Order Flow ◽  
Exchange Market ◽  
Content Type ◽  
Currency Exchange ◽  
The Us ◽  
The World

Purpose The purpose of this paper is to present the essential role that currency order flow plays in the foreign exchange markets of emerging economies in the determination of their currencies in the short and the long-run against major currencies of the world, which cannot be over emphasized, most especially against the US dollar. Insomuch that, if some of these emerging economies can be successfully transmitted into full development, it would be a good model for other emerging economies and the world at large. Design/methodology/approach A hybrid model (portfolio shift model) proposed by Evans and Lyons (2002a, 2002b) is extended to analyze a data set of every quarter of an hour currency order flow and currency exchange rate fluctuations of Thai Baht (THB) against the US$ for the period of six years (January 2010 to December 2015). To reflect the pressure of currency excess demand, the authors construct a measure of currency order flow in the Thailand currency exchange market. Vector autoregression model is applied to estimate the effectual role of currency order flow in the determination of exchange rate for the THB against the US$. Findings Currency order flow indeed accounted for a sizeable and significant portion of the fluctuations in the THB and the US$ exchange rate. Originality/value Insomuch that, the results show that currency order flow has significant explanatory power in the emerging markets economy to capture the THB exchange rate variability, and it then brings to the attention of the Thailand Monetary Authority the importance that should be attached to the market microstructure.

scholarly journals BITCOIN-USD TRADING USING SVM TO DETECT THE CURRENT DAY’S TREND IN THE MARKET

2019 ◽  
Vol 1 (1) ◽  
pp. 70-77
Author(s):  
Ferdiansyah Ferdiansyah ◽  
Edi Surya Negara ◽  
Yeni Widyanti
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Investment Decisions ◽  
Market Value ◽  
Develop Model ◽  
Support Vector ◽  
Prediction Tool ◽  
Exchange Market ◽  
Support Vector Classifier

Cryptocurrency trade is now a popular type of investment. Cryptocurrency market has been treated similar to foreign exchange and stock market. The Characteristics of Bitcoin have made Bitcoin keep rising In the last few years. Bitcoin exchange rate to American Dollar (USD) is $3990 USD on November 2018, with daily pice fluctuations could reach 4.55%2. It is important to able to predict value to ensure profitable investment. However, because of its volatility, there’s a need for a prediction tool for investors to help them consider investment decisions for cryptocurrency trade. Nowadays, computing based tools are commonly used in stock and foreign exchange market predictions. There has been much research about SVM prediction on stocks and foreign exchange as case studies but none on cryptocurrency. Therefore, this research studied method to predict the market value of one of the most used cryptocurrency, Bitcoin. The preditct methods will be used on this research is regime prediction to develop model to predict the close value of Bitcoin and use Support vector classifier algorithm to predict the current day’s trend at the opening of the market

scholarly journals HEDGING CURRENCY RISKS IN INTERNATIONAL BUSINESS USING THE OPPORTUNITIES OF THE INTERNATIONAL FOREIGN EXCHANGE MARKET

2021 ◽  
Author(s):  
Olena Liegostaieva
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
International Business ◽  
Foreign Exchange Market ◽  
Foreign Currency ◽  
Exchange Market ◽  
Currency Risk ◽  
Exchange Rate Fluctuations ◽  
Current Value ◽  
Financial Result

The article is devoted to the study of currency risk hedging in international business. The article notes that the international foreign exchange market is the largest and fastest growing of all world markets. The characteristic features of the international currency market are substantiated and offered. It is also noted that foreign exchange transactions provide economic ties between participants located on different sides of state borders: settlements between firms from different countries for the supply of goods and services, foreign investment, international tourism and business travel. It is determined that hedging of currency risks is the protection of funds from the unfavorable movement of exchange rates, and is carried out in fixing the current value of funds by concluding an agreement on the foreign exchange market. When hedging, the risk of exchange rate changes disappears, and this makes it possible to forecast the company's activities and see the financial result, which is not distorted by exchange rate fluctuations, which will allow you to determine product prices, calculate profits, etc. The main difference between hedging and other types of transactions is that its purpose is not to generate additional profits, but to reduce the risk of potential losses, as risk reduction is almost always necessary to pay, hedging, of course, involves additional costs. Hedging is a way to improve business planning. An enterprise wishing to use this service shall pledge the specified amount, from which losses on its positions will be deducted. In today's conditions, thanks to the foreign exchange market, there is a very reliable way to hedge currency risk. This method is to fix the current value of funds by concluding agreements in this market. With hedging, the company eliminates the risk of exchange rate fluctuations, and this allows you to forecast activities and see the financial result, which is not changed by exchange rate fluctuations. Allows you to pre-determine product prices, determine profits, etc. Thus, the principle of hedging in international business is to open a currency position in a foreign currency account for future transactions to convert funds.

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