BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 17/2014:
The offshore renminbi exchange rate: Microstructure and links to the onshore market
Yin-Wong Cheung ()
and Dagfinn Rime ()
Abstract: The offshore renminbi (CNH) exchange rate is the exchange
rate of the Chinese currency transacted outside China. We study the CNH
exchange rate dynamics and its links with onshore exchange rates. Using a
specialized microstructure dataset, we find that CNH is significantly
affected by its order flow and limit-order imbalance. The offshore CNH
exchange rate has an increasing impact on the onshore rate, and significant
predictive power for the official RMB central parity rate. The CNH order
flow also affects the onshore RMB exchange rate and the central parity
rate. The interactions between variables are likely to be time-varying.
Keywords: foreign exchange market microstructure; order flow; limit-order imbalance; CNH; CNY; central parity rate; (follow links to similar papers)
JEL-Codes: F31; F33; G14; G15; G21; G28; (follow links to similar papers)
42 pages, September 29, 2014
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