The Offshore Renminbi Exchange Rate: Microstructure and Links to the Onshore Market

34 Pages Posted: 11 Jun 2014 Last revised: 18 Jun 2014

See all articles by Yin-Wong Cheung

Yin-Wong Cheung

University of California, Santa Cruz - Department of Economics

Dagfinn Rime

BI Norwegian Business School

Multiple version iconThere are 3 versions of this paper

Date Written: June 10, 2014

Abstract

The offshore renminbi (CNH) exchange rate is the exchange rate of the Chinese currency transacted outside China. We study the CNH exchange rate dynamics and its links with onshore exchange rates. Using a specialized microstructure dataset, we find that CNH is significantly affected by its order flow and limit-order imbalance. The offshore CNH exchange rate has an increasing impact on the onshore rate, and significant predictive power for the official RMB central parity rate. The CNH order flow also affects the onshore RMB exchange rate and the central parity rate. The interactions between variables are likely to be time-varying.

Keywords: Foreign Exchange Market Microstructure, Order Flow, Limit-Order Imbalance, CNH, CNY, Central Parity Rate

JEL Classification: F31, F33, G14, G15, G21, G28

Suggested Citation

Cheung, Yin-Wong and Rime, Dagfinn, The Offshore Renminbi Exchange Rate: Microstructure and Links to the Onshore Market (June 10, 2014). Available at SSRN: https://ssrn.com/abstract=2448398 or http://dx.doi.org/10.2139/ssrn.2448398

Yin-Wong Cheung (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Engineering 2, Department of Economics
University of California
Santa Cruz, CA 95064
United States
831-459-5077 (Fax)

Dagfinn Rime

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
+47-46410507 (Phone)

HOME PAGE: http://home.bi.no/dagfinn.rime/

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