This paper investigates how order flows drive dynamic co-movements of exchange rates. We allow for asymmetric correlation responses to positive/negative shocks, control for structural breaks, bid-ask spreads and volatility effect of order flows, employ alternative order flow measures, and...

The coordination channel has been proposed as a means by which foreign exchange market intervention may be effective, in addition to the traditional portfolio balance and signaling channels. If strong and persistent misalignments of the exchange rate are caused by non-fundamental influences,...