Intraday patterns in FX returns and order flow
AbstractUsing 10 years of high-frequency foreign exchange data, we present evidence of time-of-day effects in foreign exchange returns through a significant tendency for currencies to depreciate during local trading hours. We confirm this pattern across a range of currencies and find that, in the case of EUR/USD, it can form a simple, profitable trading strategy. We also find that this pattern is present in order flow and suggest that both patterns relate to the tendency of market participants to be net purchasers of foreign exchange in their own trading hours. Data from alternative sources appear to corroborate that interpretation.
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Bibliographic InfoPaper provided by Swiss National Bank in its series Working Papers with number 2011-04.
Length: 28 pages
Date of creation: 2011
Date of revision:
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foreign exchange; microstructure; order flow; liquidity;
Other versions of this item:
- Francis Breedon & Angelo Ranaldo, 2013. "Intraday Patterns in FX Returns and Order Flow," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 45(5), pages 953-965, 08.
- Francis Breedon & Angelo Ranaldo, 2012. "Intraday Patterns in FX Returns and Order Flow," Working Papers, Queen Mary, University of London, School of Economics and Finance 694, Queen Mary, University of London, School of Economics and Finance.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-MON-2011-04-09 (Monetary Economics)
- NEP-MST-2011-04-09 (Market Microstructure)
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