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Liquidity provision in the overnight foreign exchange market

Geir Bjønnes, Dagfinn Rime () and Haakon O. Aa. Solheim ()
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Haakon O. Aa. Solheim: Statistics Norway, https://www.ssb.no/en/forskning/ansatte

Discussion Papers from Statistics Norway, Research Department

Abstract: We presents evidence that non-financial customers are the main liquidity providers in the overnight foreign exchange market using a unique daily data set covering almost all transactions in the SEK/EUR market over almost ten years. Two main findings support this: (i) The net position of non-financial customers is negatively correlated with the exchange rate, opposed to the positive correlation found for financial customers; (ii) Changes in net position of non-financial customers are forecasted by changes in net position of financial customers, indicating that non-financial customers take a passive role consistent with liquidity provision.

Keywords: Microstructure; International finance; Liquidity (search for similar items in EconPapers)
JEL-codes: F31 F41 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-ifn
Date: 2004-09
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Journal Article: Liquidity provision in the overnight foreign exchange market (2005) Downloads
Working Paper: Liquidity provision in the overnight foreign exchange market (2004) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:391

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