The Relationship between Taiwanese Dollar Forward Rates and Chinese Yuan Spot Rate

ASIAIR > College of Management > Department of Finance > Theses & dissertations > Item 310904400/100772

Please use this identifier to cite or link to this item: http://asiair.asia.edu.tw/ir/handle/310904400/100772

Title:	The Relationship between Taiwanese Dollar Forward Rates and Chinese Yuan Spot Rate
Authors:	Lai, Shiou-Fong
Contributors:	財務金融學系碩士在職專班
Keywords:	foreign exchange forwards;exchange rate variation;causality relation;vector error correction model
Date:	2016
Issue Date:	2016-08-16 02:20:31 (UTC+0)
Publisher:	亞洲大學
Abstract:	Recently, global investors focus on Chinese Yuan (CNY) especially after CNY was added in a basket of currencies as special deposit right (SDR), it became more and more important in international markets. The purpose of this study is to discover the relationship between Taiwanese Dollar (TWD) forward rates and CNY spot rate. We adopt 30, 60, and 90 day-forward rates of TWD and spot rate of CNY in daily basis to investigate the co-movement of TWD forward rates and CNY spot rate. Empirical results show that TWD forward rates Granger cause CNY spot rate but CNY spot rate does not Granger causes TWD forward rates. Additionally, the result of vector error correction estimate shows that while TWD and CNY deviate from long-term equilibrium, CNY will depreciate but the effect is insignificant. The implications of this study is enterprises or investors can effectively manage currency risk if catching up the currency trends and using appropriate strategies, importers will buy CNY or long TWD forwards before they appreciate while exporters will sell CNU or short TWD forwards before they depreciate.
Appears in Collections:	[Department of Finance] Theses & dissertations

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