What does currency order flow tell about spot exchange rates of Asian emerging markets?

Muhammad, Aftab and Anifowose, Abolaji Daniel and Lau, Evan and Izlin, Ismail (2020) What does currency order flow tell about spot exchange rates of Asian emerging markets? Borsa Istanbul Review. ISSN ISSN: 2214-8450 (In Press)

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Abstract

This study investigates the role of currency order flow in explaining the emerging Asian markets' exchange rates relying on linear and nonlinear modeling. The daily currency order flow of the US dollar relative to the nine important Asian currencies is constituted and explored with the respective exchange rates. First, we find that order flow affects the spot exchange rate positively for the sampled Asian currencies which indicates that the buying pressure of the US dollar depreciates Asian currencies. Second, the effect of order flow is asymmetric which explains that a surge and a fall in order flow have different effects on the exchange rate. This study unlocks the contribution of the market microstructure research where the asymmetries improve the power to explicate exchange rates. The nonlinear model forecasting performance validates this stance.

Item Type: Article
Uncontrolled Keywords: Currency order flow, Exchange rate, Asymmetric relationship, Market microstructure, Emerging markets, unimas, university, universiti, Borneo, Malaysia, Sarawak, Kuching, Samarahan, ipta, education, research, Universiti Malaysia Sarawak
Subjects: H Social Sciences > HB Economic Theory
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Depositing User: Poh Hock
Date Deposited: 15 Dec 2020 05:56
Last Modified: 15 Dec 2020 05:56
URI: http://ir.unimas.my/id/eprint/33378

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