Scandinavian Working Papers in Economics

SIFR Research Report Series,
Institute for Financial Research

No 4: U.S. Exchange Rates and Currency Flows

Dagfinn Rime
Additional contact information
Dagfinn Rime: Swedish Institute for Financial Research, Postal: Saltmätargatan 19A, SE-113 59 Stockholm, Sweden

Abstract: After the Meese & Rogoff 1983-results, researchers have searched with torch for macroeconomic variables with predictive power on horizons shorter than 6 months. Recently, several papers have showed that order flows influence exchange rates intradaily. Maybe order flow may be of importance also for lower frequencies than intraday, like the weekly frequency? In this paper I test a trading model where order flow may be informative due to the existence of private information, and where there are important macroeconomic public information as well. Using weekly data for spot and options trading in the U.S., the model is tested for five exchange rates against US Dollar. For three of the exchange rates, DEM/USD, GBP/USD and CHF/USD, I find that order flow is an important variable for explaining weekly changes in exchange rates. The coefficients are both statistically and economically significant, and have intuitive sign. When U.S. banks sell foreign currency, the foreign currency depreciates.

Keywords: Foreign Exchange; International Macroeconomics; Microstructure

JEL-codes: F13; F33; G15

33 pages, December 15, 2001

Full text files

us-flows.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Anki Helmer ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:37:47.