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

Aftab, Muhammad and Anifowose, Abolaji Daniel and Lau, Evan and Ismail, Izlin (2021) What does currency order flow tell about spot exchange rates of Asian emerging markets? Borsa Istanbul Review, 21 (3). pp. 281-290. ISSN 2214-8450, DOI https://doi.org/10.1016/j.bir.2020.11.003.

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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. Copyright (C) 2020, Borsa Istanbul Anonim Sirketi. Production and hosting by Elsevier B.V.

Item Type: Article
Funders: Higher Education Commission of Pakistan (296.135/TG/R&D/HEC/2017/26482)
Uncontrolled Keywords: Currency order flow; Exchange rate; Asymmetric relationship; Market microstructure; Emerging markets
Subjects: H Social Sciences > HG Finance
H Social Sciences > HG Finance > Banking
Divisions: Faculty of Business and Economics > Dept of Finance and Banking
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 16 Apr 2022 01:48
Last Modified: 16 Apr 2022 01:48
URI: http://eprints.um.edu.my/id/eprint/26718

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