Exchange rate changes and net positions of speculators in the EuroFX futures market - Does market size matter?

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School of Economics | Master's thesis
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Date

2011

Department

Department of Economics
Taloustieteen laitos

Major/Subject

Economics
Kansantaloustiede

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Degree programme

Language

en

Pages

64

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Abstract

This thesis analyses whether the size of the EuroFX futures market (measured through the growth rate of the total open interest in the EuroFX futures market at the Chicago Mercantile Exchange) has an effect in the determination of the Euro per dollar exchange rate in short horizons, and if the relationship between changes in the net positions of speculators in the EuroFX futures market and changes in the Euro per dollar exchange rate is affected by the size of the market. For the period from January 5, 1999 to December 28, 2010, it could be concluded that when the growth rate of the EuroFX futures market is relatively stable, this variable is a determinant to explain exchange rate movements in the short-term, and also that the relationship between changes in the net positions of speculators in the EuroFX futures market and changes in the Euro per dollar exchange rate is affected by the fast growth in the EuroFX futures market. This implies that speculators should consider the growth of the EuroFX futures market to forecast changes in the spot exchange rate when the size of the market is relatively stable.

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exchange rate, net positions of speculators, euro futures market, microstructure approach, open interest, growth, size

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https://urn.fi/URN:NBN:fi:aalto-201111291704

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[gradu] Kauppakorkeakoulu / BIZ