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Dynamic Linkages between US Dollar-Ringgit spot, forward and NDF during QE and Post-QE Exit

Indonesian Capital Market Review

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Title Dynamic Linkages between US Dollar-Ringgit spot, forward and NDF during QE and Post-QE Exit
 
Creator Wee Yeap Lau; University of Malaya
Tien Ming Yip; University of Malaya
You How Go; Universiti Tunku Abdul Rahman (UTAR)
 
Subject forward market; non-deliverable forward; quantitative easing; emerging market; Federal Open Market Committee
 
Description This study investigates the information flow between U.S. Dollar-Ringgit spot, forward and Nondeliverable Forward (NDF) exchange rates during the pre and post-U. S. Quantitative Easing (QE) exit. Our results show: First, there is a robust unidirectional causality from NDF to spot and NDF to forward in the post-QE period; Second, Malaysian Government Securities (MGS) has a vital role during the QE period while international reserve precedes the spot, forward and NDF exchange rates in the post-US QE exit. Our results reaffirm the policy measures taken by the Central Bank in regulating the NDF market. Our finding suggests that: First: MGS and Reserve are essential variables that can be used to counter speculation from the offshore NDF market; and Second, right policy stance must be communicated by the Central Bank to the market participants to avoid excessive volatility to the domestic currency which will affect the real economy
 
Publisher Management Research Center, Department of Management, Faculty of Economics and Business, U
 
Contributor —
 
Date 2020-05-17
 
Type —
 
Format application/pdf
 
Identifier http://journal.ui.ac.id/index.php/icmr/article/view/11606
 
Source Indonesian Capital Market Review; ##issue.vol## 11, ##issue.no## 2 (2019): July 2019 (in press)
 
Language en