Analysis of spreads in the Dollar/Euro and Deutsche Mark/Dollar foreign exchange markets

Richard Payne (), Charles Goodhart () and Dagfinn Rime

FMG Discussion Papers from Financial Markets Group

Abstract: This paper tries to provide a simple explanation for the empirical finding, documented here and also by Hau, Killeen and Moore (2002), that spreads in the spot USD/EUR market are substantially higher than those in the preceding DEM/USD foreign exchange market. The paper argues that it is primarily the re-factoring of the exchange rate, 1.75 DEM per USD compared to 1 USD per EUR together with the fact that dealers are faced with a minimum tick size, that has caused spreads to increase (as a percentage of mid-quote).

Date: 2002-02
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Related works:
Journal Article: Analysis of spreads in the dollar/euro and deutschemark/dollar foreign exchange markets (2002)
Working Paper: Analysis of spreads in the dollar/euro and Deutsche Mark/dollar foreign exchange markets (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp467

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