We provide a broad empirical investigation of momentum strategies in the foreign exchange market. We find a significant cross-sectional spread in excess returns of up to 10% p.a. between past winner and loser currencies. This spread in excess returns is not explained by traditional risk factors,...

The forward premium anomaly has served as the theoretical foundation of positive returns from currency speculation. Nonlinearity in the relation of currency returns and interest rate differentials should be included in speculator expectations. Within narrow ranges, the counteracting effects of...

This paper presents the first comprehensive examination of liquidity in the global foreign exchange (FX) swap market. Our analysis employs effective measures that assess both the tightness and depth of the global market. We identify three main findings: First, FX swap liquidity is fragmented...

We investigate the information contained in foreign exchange (FX) volume using a novel dataset from the over-the-counter market. We find volume helps predict next day currency returns and is economically valuable for currency investors. Predictability implies a stronger currency return reversal...

We describe a novel currency investment strategy, the `dollar carry trade,' which delivers large excess returns, uncorrelated with the returns on well-known carry trade strategies. Using a no-arbitrage model of exchange rates we show that these excess returns compensate U.S. investors for taking...

The latest BIS Triennial Survey shows that global foreign exchange trading increased to more than $6 trillion per day. Trading bounced back strongly following a dip in 2016, buoyed by increased trading with financial clients such as lower-tier banks, hedge funds and principal trading firms....

For the first time in 15 years, FX trading volumes contracted between two consecutive BIS Triennial Surveys. The decline in trading by leveraged institutions and "fast money" traders, and a reduction in risk appetite, have contributed to a significant drop in spot market activity. More active...

Using a measure of global political risk, relative to the U.S., that captures unexpected political conditions, we show that political risk is priced in the cross section of currency momentum and contains information beyond other risk factors. Our results are robust after controlling for...

In this paper we derive the measure of position-unwinding risk of currency carry trade portfolios from the currency option pricing model. The position-unwinding likelihood indicator is in nature driven by interest rate differential and currency volatility, and highly correlated with global...