Module 6: Foreign Exchange Markets
20 May 2011
Module 6 began with an overview of the international financial landscape as well as the institutional and organizational characteristics of the foreign exchange market. An understanding of the linkages between macroeconomic variables and exchange rates was developed. The empirical evidence on various exchange rate models and that of the role of macroeconomic news and currency movements were reviewed. Prof Levich demonstrated how the theory of market efficiency was applied to the foreign exchange market. We also explored various techniques for testing exchange market efficiency as well as empirical studies based on those techniques. How the theories of exchange rate determination and studies of exchange market efficiency could be utilized to formulate techniques for exchange rate forecasting was also investigated. A framework and taxonomy of alternative currency forecasting techniques, and present evidence on their effectiveness on different market situations were thus developed.