Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265956 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9921
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
FX trade settlement data from CLS provides the most comprehensive view of the opaque market of OTC currency trades. We use the flows of investment funds and non-financial corporates and develop trading signals where the former reflects speculative strategies, while the latter trade for liquidity needs. The implication is we trade in the direction of the funds flows and trade against large corporate flows, which should be followed by price reversals. Trading with informed flows yields positive risk-adjusted performance. Incorporating the liquidity trades signal improves risk-adjusted performance and greatly lowers the tail risk of the model.
Subjects: 
foreign exchange
currency flows
informed trading
currency investing
JEL: 
F31
G15
Document Type: 
Working Paper
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