Liquidity in the Global Currency Market

44 Pages Posted: 22 Nov 2018 Last revised: 3 Oct 2022

See all articles by Angelo Ranaldo

Angelo Ranaldo

University of St. Gallen; Swiss Finance Institute

Paolo Santucci de Magistris

Luiss University of Rome

Date Written: September 5, 2022


We study the liquidity of the global currency market by analyzing the price impact of trading volume. We analyze a decade of CLS intraday data representative of global foreign exchange (FX) trading by developing a refinement of the popular Amihud (2002) illiquidity measure that we callrealized Amihud, which is the ratio between realized volatility and trading volume. Inversely related to market depth, price impact increases with transaction costs, money market stress, uncertainty, and risk aversion. Furthermore, we analyze whether and how liquidity begets price efficiency by looking at violations of the “triangular” no-arbitrage condition. We €nd that dollar-based currencies offer a lower trading impact supporting price efficiency.

Keywords: Foreign Exchange, Global Market, Liquidity, Price Impact, Arbitrage.

JEL Classification: C15, F31, G12, G15

Suggested Citation

Ranaldo, Angelo and Santucci de Magistris, Paolo, Liquidity in the Global Currency Market (September 5, 2022). Journal of Financial Economics (forthcoming), University of St.Gallen, School of Finance Research Paper No. 2018/23., Available at SSRN: or

Angelo Ranaldo (Contact Author)

University of St. Gallen ( email )

School of Finance
Unterer Graben 21
St. Gallen, 9000
+41712247010 (Phone)


Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
+41796637711 (Phone)


Paolo Santucci de Magistris

Luiss University of Rome ( email )

Viale Romania 32
Rome, 00197

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