FOREX DEALERS‘ PERSPECTIVES ON EXCHANGE RATE DETERMINATION IN KOREA

Changmo Ahn, George Fane, Euy Hoon Suh

Research output: Contribution to journalArticlepeer-review

Abstract

This paper reports on a survey of dealers in the Korean foreign exchange market. The trade balance and foreign portfolio investment are reported to be the two most important variables in determining the exchange rate. Although dealers believe that fundamental factors are important, their decisions, particularly in the short run, are also affected by ‘noise’ factors such as herding behaviour, the use of charts and trends, the advice of opinion leaders, and positions that have already been taken. Speculation is perceived positively as enhancing market efficiency and liquidity. Arbitrage is limited by risk aversion and the unpredictability of future exchange rate changes.

Original languageEnglish
Pages (from-to)140-151
Number of pages12
JournalEconomic Papers
Volume23
Issue number2
DOIs
Publication statusPublished - 1 Jun 2004
Externally publishedYes

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