NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Traders, Market Microstructure and Exchange Rate Dynamics

Yin-Wong Cheung, Menzie D. Chinn

NBER Working Paper No. 7416
Issued in November 1999
NBER Program(s):   IFM

We report findings from a survey of United States foreign exchange traders. Our results indicate that: (i) The share of customer business, versus interbank business, has remained fairly constant; (ii) The channels by which transactions take place have changed, as electronically-brokered transactions have risen from 2% to 46% of total, mostly at the expense of transactions undertaken by traditional brokers; (iii) The single most widely- cited reason for deviating from the standard market convention on the bid-ask spread is a thin/hectic market; (iv) Half or more of market respondents believe that large players dominate in the dollar-pound and dollar-Swiss franc markets; and (v) 60% of respondents believe there is low predictability of exchange rates intraday. Even at medium and long run horizons, only a third of traders believe that there is high predictability.

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Document Object Identifier (DOI): 10.3386/w7416

Published: Cheung, Yin-Wong and Menzie David Chinn. "Currency Traders And Exchange Rate Dynamics: A Survey Of The US Market," Journal of International Money and Finance, 2001, v20(4,Aug), 439-471.

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