Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246118 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 16/2020
Publisher: 
Norges Bank, Oslo
Abstract: 
This paper investigates price discovery in foreign exchange (FX) swaps. Using data on inter-dealer transactions, we find that a 1 standard deviation increase in order flow (i.e. net pressure to obtain USD through FX swaps) increases the cost of dollar funding by up to 4 basis points after the 2008 crisis. This is explained by increased dispersion in dollar funding costs and quarter-end periods. We find central bank swap lines reduced the order flow to obtain USD through FX swaps, subsequently affecting the forward rate. In contrast, during quarter-ends and monetary announcements we observe high frequency adjustment of the forward rate.
Subjects: 
interest rate parity
exchange rates
currency swaps
order flow
dollar funding
JEL: 
E43
F31
G15
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-170-9
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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