FX derivatives trading influences exchange rates, according to new research

london.edu

New research reveals FX derivatives trading significantly influences exchange rates, driven by who is trading and their motivations. The study analyzed 100 million transactions in London, finding pension funds and companies hedge currency risk, while hedge funds speculate, impacting exchange rates through interest rate and news responses. This research challenges existing exchange rate models, emphasizing the crucial role of FX derivatives market structure for policymakers and investors.


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FX derivatives trading influences exchange rates, according to new research | News Minimalist