 Exchange rate changes and net positions of speculators in the futures marketThomas Klitgaard and Laura Weir Economic Policy Review, 2004, issue May, No v.10 no.1, 17-28 Abstract: Traders, strategists, and other participants in the currency markets continuously seek to understand and interpret short-term exchange rate movements. One data set frequently used in those efforts is a weekly report of net futures market positions held by speculators on the Chicago Mercantile Exchange. In this article, the authors pursue a transaction-oriented line of research to track short-term exchange rate moves. They examine the data set for six currencies over a ten-year period and document a strong contemporaneous relationship between weekly changes in speculators' net positions and exchange rates. The authors find that knowing what speculators did over a given week gives one a 75 percent probability of correctly guessing an exchange rate's direction over that week. One explanation for this relationship is that these speculators-acting on their interpretation of public and private information-have some success anticipating how underlying demand will move exchange rates from their prevailing levels in the very short term. Keywords: Speculation; Futures; Foreign exchange rates (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fip:fednep:y:2004:i:may:p:17-28:n:v.10no.1 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Economic Policy Review from Federal Reserve Bank of New York Contact information at EDIRC. |
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