Offshore Dollar Buying Linked to Emerging-Market Currency Moves

Offshore dollar buying was associated with domestic spot depreciation across emerging markets, with price discovery shared between onshore and offshore markets. In daily panel regressions, a $1 billion increase in order flow buying U.S. dollars and selling emerging-market currencies was associated with a 9 to 11 basis-point depreciation in onshore spot rates. Offshore non-deliverable forward (NDF) rates moved 18 to 19 basis points on impact, though that estimate was less precise. The regressions show an association between order flow and exchange-rate returns, not proof that the trades caused the currency moves. Published Oct. 16, the study covers 10 currency pairs from Jan. 1, 2013, through Dec.

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