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The twin faces of emerging Asia's currency forward markets in an imperfect setting

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  • Suresh Ramanathan
  • Kian-Teng Kwek

Abstract

Covered interest parity fails to occur in both the onshore and offshore currency forward markets for emerging Asia. The deviation is largely influenced by a two-tier currency forward market given the barriers to capital flow, with the exception of Hong Kong. The structural difference between onshore and offshore currency forward markets lends support for arbitrageurs to exploit the segmentation of markets.

Suggested Citation

  • Suresh Ramanathan & Kian-Teng Kwek, 2013. "The twin faces of emerging Asia's currency forward markets in an imperfect setting," Applied Financial Economics, Taylor & Francis Journals, vol. 23(18), pages 1433-1446, September.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:18:p:1433-1446
    DOI: 10.1080/09603107.2013.831169
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    References listed on IDEAS

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    1. Niall Coffey & Warren B. Hrung & Asani Sarkar, 2009. "Capital constraints, counterparty risk, and deviations from covered interest rate parity," Staff Reports 393, Federal Reserve Bank of New York.
    2. Tsuyuguchi, Yosuke & Wooldridge, Philip D., 2008. "The evolution of trading activity in Asian foreign exchange markets," Emerging Markets Review, Elsevier, vol. 9(4), pages 231-246, December.
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