Commodity Price, Carry Trade, and the Volatility and Liquidity of Asian Currencies

23 Pages Posted: 11 Jun 2014

See all articles by Maria Socorro Gochoco‐Bautista

Maria Socorro Gochoco‐Bautista

University of the Philippines, School of Economics

Jianxin Wang

University of Technology Sydney (UTS)

Minxian Yang

UNSW Australia Business School, School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

This study examines how the volatility and liquidity of 10 Asian exchange rates against the US dollar change with volatilities in commodity price and carry trade over the period of January 2000 to June 2010. We find that uncertainties in commodity markets and carry trades are significantly correlated with the volatilities and the bid‐ask spreads of most Asian currencies. The correlation with carry trade is generally stronger and has been rising over the sample period. While high volatilities in carry trade are associated with high volatilities in many Asian currencies, high volatilities in commodity price do not coincide with excessive volatilities in Asian currencies. This suggests that investors and policymakers should be more concerned with the volatility in carry trade.

Suggested Citation

Gochoco-Bautista, Maria Socorro and Wang, Jianxin and Yang, Minxian, Commodity Price, Carry Trade, and the Volatility and Liquidity of Asian Currencies (June 2014). The World Economy, Vol. 37, Issue 6, pp. 811-833, 2014. Available at SSRN: https://ssrn.com/abstract=2448779 or http://dx.doi.org/10.1111/twec.12089

Maria Socorro Gochoco-Bautista (Contact Author)

University of the Philippines, School of Economics ( email )

Quezon City, Diliman
Philippines

Jianxin Wang

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
Sydney, New South Wales 2000
Australia

Minxian Yang

UNSW Australia Business School, School of Economics ( email )

School of Economics
The University of New South Wales
Sydney, NSW NSW 2052
Australia
93853353 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
258
PlumX Metrics