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Any other factors that move a currency other than news?

  #5 (permalink)

Helsinki, Finland
 
 
Posts: 23 since Dec 2013
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Order flow maybe the answer?

The question here is closely related to the one of the major exchange rate puzzles that scientific world is also struggling with. That is, why volatility in FX market is much bigger than the changes in fundamental data expects.

Microstucture theory has some interesting viewpoints in this matter, and it suggest that not only public information (like news etc.) causes the volatility but also private information, which is dispersed across the FX markets by dealers quotes , affects FX markets volatility. Dealer get this private information from the order flow that he receives. Of course this is much deeper thing and should be read carefully if you find it interesting.

The order flow itself contains important information about investors expectations about the future. This private information may also contain rumors about central banks interventions, which has found to be one of the things that affects volatility. Also traders like to ride with the trend and this may cause speculators to join in the markets even thought there is no actual reason for exchange rate moves and therefore strengthen the volatility. The final reason that i have found about what causes exchange rate volatility is speculative "betting" about future news announcements.

My opinion is that volatility in FX market is summary of many factors and the underlying driving force, when there is no news announcemets is really hard determine. I agree with Itchymuko that almost every currency pair in FX market is somehow linked to another and by that the volatility disperses across the market.

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