Currency Trading Research Articles

BRICS Expansion: A Geopolitical Triumph of Partner Countries

The BRICS organization is making significant and consistent progress in its development. The 15th BRICS Summit was held in Johannesburg from 22 to 24 August 2023. This summit is a global event that sets the trends and guiding principles for future economic policies. Four of the five BRICS member countries are among the ten largest countries in the world in terms of GDP, territory and population. According to open sources, the total area of the BRICS countries is 39.7 million square kilometers (26.7% of the world’s land surface), and the population is estimated at3.2 billion people (41.5% of the world’s population). The economic potential of BRICS, as the leading economic organization in the world, is more than significant. These competitive advantages in the economy and financial sphere represent an enormous resource of industrial, human and technological potential that can serve as the locomotive of the global economy. Following the conclusion of the above summit, the leaders of the BRICS countries adopted the final “Johannesburg-2” declaration, which noted the advisability of using their countries’ respective national currencies in international trade and collectively resolving problems related to international debt. In addition, decisions were made to expand BRICS and admit new member states to the organization. BRICS has established itself as a prominent entity on the global stage, whose influence in world affairs is consistently strengthening. The strategic course of their unification is aimed at planning for the future and meets the interests of the leading nations of the international community, the so-called world majority. By acting cohesively on the principles of equality, partnership support and mutual consideration, the BRICS member countries are effectively addressing the most pressing issues on the global and regional agenda. The BRICS member states are strongly in favor of the establishment of a multipolar world order that is based on international law and is fair. At the same time, they are committed to adhering to the fundamental principles of the United Nations Charter. BRICS is the most important guarantor of the legal foundations of international relations and a fair world order in general. The recent expansion of the BRICS group is a significant event that enables the group to have an even greater influence in international affairs. The presented article analyzes the features of the recent expansion of BRICS and its impact on world geopolitics, taking into account the admission of new states to the organization. The distinctive features of the BRICS group activities and its role in relation to the G7 and G20 are revealed. The trends in the transition to a multipolar world are discussed. Furthermore, issues of political and economic cooperation between the different BRICS member countries are analyzed.

Forecasting nominal exchange rates using a dynamic model averaging framework

This paper presents a dynamic model averaging approach for forecasting nominal exchange rates. This framework encompasses most of the approaches commonly used in the forecasting literature and also allows us to study parameters and model uncertainty in exchange rate forecasting. We focus on nine major trading currency pairs: AUD/USD, CAD/USD, CHF/USD, EUR/USD, GBP/USD, NOK/USD, NZD/USD, SEK/USD, and JPY/USD, where we use data for approximately the last two decades. We empirically show statistically and economically significant exchange rate predictability in the medium and long run, and we also present some findings on predictability even in the short run. We offer several theoretical explanations for these results on predictability.

Система публічного адміністрування nоргівлі валютними цінностями

The article is devoted to the definition of the system of public administration of trade in currency values, the problem of theoretical substantiation of its elements, the main types of manifestations of the administration of this sphere, the study of the subjects of the implementation of administration functions, the study of the current legislation regulating this sphere of public-legal relations. Particular attention is paid to the definition of the content of the category “trade in currency values”, the disclosure of the legal nature and features of the category “public administration”, the outline of the approaches to the definition of its content and constituent elements available in domestic science. The definition of the system of public administration of trade in currency values and its constituent elements was carried out within the framework of the instrumental theory in law. It was established that, taking into account the initial provisions of the instrumental theory, the instruments of public administration of currency trading in Ukraine should be considered the norms of the current legislation, which determine the procedure for carrying out, in particular, the licensing of this activity, its control, taxation, the application of other management measures, prohibitions in this sphere, activity and law-enforcement acts of public administration bodies that carry out such management activities are empowered to impose administrative and financial sanctions. A proper definition of the category “administration of trade in currency values in Ukraine” is proposed. It was determined that the administration of trade in foreign exchange values takes place on the basis of complexity, reasonableness, flexibility of implementation and adaptability to the conditions of application of control and other measures, the expediency of their application, and orientation towards the consistent solution of current and long-termtasks of the state’s currency policy. The peculiarities of the functioning of subjects of the administration of currency trade in Ukraine, including the National Bank of Ukraine, the Ministry of Economy of Ukraine, the National Commission for Securities and the Stock Market, the State Tax Service of Ukraine and the Cabinet of Ministers of Ukraine in general, have been determined. It was found that the main subject of the administration of the outlined spheres of public legal relations is the National Bank of Ukraine. It is he who implements administrative, regulatory, control and other instruments in the field of currency relations. At the same time, other areas of implementation of the administration are disclosed, in particular, the activity of public administration bodies within the framework of taxation procedures of the researched activity is outlined.

Chinese currency exceptionalism: The curious internationalisation of the renminbi

AbstractThe People's Republic of China (PRC) lacks the macroeconomic conditions to internationalise its currency, the renminbi (RMB). Despite tight controls on capital markets in China, the international use of the RMB has increased significantly with the RMB becoming the fifth most used currency in global trade and financial markets. We argue that the internationalisation of the RMB has followed an unusual process, differing from the more typical features depicted in the literature on currency internationalisation. The RMB has internationalised despite the reluctance of the Chinese government to liberalise the country's current and capital accounts and its financial market. We argue that the investment role of money—overlooked or downplayed in this literature—is the main driver of RMB internationalisation. The Chinese government has created specific investment channels for non‐Chinese investors that allow a controlled flow of capital to enter China's securities markets. The major players promoting the international use of the RMB are Western banks, the investment fund industry and financial services firms that have included Chinese securities in their indices. In the absence of structural conditions to expand the RMB's international use, we suggest that agents matter the most in this phase of limited RMB internationalisation.

Currency market volatility during the COVID-19 pandemic

The currency market is one of the main markets of the world's modern financial and economic systems. With respect to the availability of information, this market is the most data-rich and public. These two features allow it to be viewed as volatile. This study aims to assess the dependence of the currency market's volatility on the conditions and factors that formed during the COVID-19 pandemic. The research used statistical and correlation analysis and general scientific methods. Correlation analysis revealed an insignificant effect of the dollar index on the change in currency market volatility during the COVID-19 pandemic (r = 0.09). The outcomes indicated the impact of the disease factor on currency trading at the 0.8% level (r2 = 0.0081). The research conclusions suggest that the effects of information on the currency market differed during 2015-2019 and deviated in response to various political and economic events. The study highlights that the COVID-19 pandemic and its aftermath did not significantly influence the currency pairs' volatility. In the future, if crisis trends re-emerge, the findings of this study may influence the behavior of investors and participants in global trade. This could affect their investment decisions, currency reserve diversification, insurance strategies, and capital migration.

Determine Intraday Trading Currency's Trend Framework Evidence From Machine Learning Techniques

The purpose of this study is to determine the intraday hourly trading trends of currencies using predictive modeling techniques. The study encompasses two distinct intraday time intervals of 30 minutes and 1 hour, analyzing currencies from 8 different countries. It incorporates the use of wavelets MODWT to identify trends and noise in intraday currency analysis. Three predictive models, namely Support Vector Regression, Recurrent Neural Network, and Long Short-Term Memory, are applied to relative time series data to predict intraday trading currency trends. The study reveals significant noise presence in three currencies based on MODWT analysis. Additionally, it demonstrates that deep learning techniques, such as LSTM, outperform traditional machine learning approaches in accurately predicting intraday currency trends. This study contributes substantially to the theoretical understanding of international finance and provides practical insights for real-time problem-solving in currency markets. Further, this research adds to the discourse on leveraging sophisticated analytical methods within the domain of business intelligence to enhance decision-making processes in organizations operating within dynamic and complex financial environments.

High-Frequency Quantitative Trading of Digital Currencies Based on Fusion of Deep Reinforcement Learning Models with Evolutionary Strategies

High-frequency quantitative trading in the emerging digital currency market poses unique challenges due to the lack of established methods for extracting trading information. This paper proposes a deep evolutionary reinforcement learning (DERL) model that combines deep reinforcement learning with evolutionary strategies to address these challenges. Reinforcement learning is applied to data cleaning and factor extraction from a high-frequency, microscopic viewpoint to quantitatively explain the supply and demand imbalance and to create trading strategies. In order to determine whether the algorithm can successfully extract the significant hidden features in the factors when faced with large and complex high-frequency factors, this paper trains the agent in reinforcement learning using three different learning algorithms, including Q-learning, evolutionary strategies, and policy gradient. The experimental dataset, which contains data on sharp up, sharp down, and continuous oscillation situations, was chosen to test Bitcoin in January-February, September, and November of 2022. According to the experimental results, the evolutionary strategies algorithm achieved returns of 59.18%, 25.14%, and 22.72%, respectively. The results demonstrate that deep reinforcement learning based on the evolutionary strategies outperforms Q-learning and policy gradient concerning risk resistance and return capability. The proposed approach offers a robust and adaptive solution for high-frequency trading in the digital currency market, contributing to the development of effective quantitative trading strategies.

Russia's transition to settlements in national currencies in the context of changes in the world monetary and financial system

Aim. To determine the background and prospects of the Russian Federation's (RF) transition to settlements in national currencies in the context of changes in the world monetary and financial system.Objectives. To analyze the current state of the currency market of the Russian Federation in terms of currency structure and main instruments; to identify the reasons for the transformation of the currency market of the Russian Federation; to characterize the prerequisites for the transition to settlements in national currencies in foreign trade; to assess the prospects of such a transition and its impact on the currency market of the Russian Federation in the context of the latest trends in the development of the global monetary and financial system.Methods. With the help of general methods of scientific cognition, graphical analysis the current state, dynamics and structure of the currency market of the Russian Federation in the conditions of sanctions are considered. In addition, the article assesses the background and prospects of the Russian Federation's transition to settlements in national currencies in view of the new trends in the development of the world monetary and financial system.Results. In 2022, after the economic sanctions against Russia were imposed, the state was forced to accelerate the process of transition to settlements in national currencies with major trading partners, and the domestic currency market underwent a significant transformation. In the conditions of digitalization of the financial sphere and the development of central bank digital currencies (CBDCs) , the introduction of international settlements using the digital ruble seems to be a promising direction.Conclusions. The period after the sanctions against the Russian Federation were imposed (2022) is marked by significant changes in the domestic foreign exchange market, primarily associated with the gradual displacement of world currencies (primarily the dollar) and their replacement by the ruble and renminbi. In general, this trend reflects the state of the RF foreign trade. With the reduction in the volume of the local foreign exchange market and the withdrawal of Western players, the government is taking measures aimed at preserving the potential of the foreign exchange market. A promising direction for international settlements under sanctions is through CBDC. However, the implementation of such a system will take years, during which the financial system of the Russian Federation will have to preserve its potential in isolation from Western financial markets.

Unsupervised Anomaly Detection in Digital Currency Trading: A Clustering and Density-Based Approach Using Bitcoin Data

Unsupervised Anomaly Detection in Digital Currency Trading: A Clustering and Density-Based Approach Using Bitcoin Data

The Effect of the Fed Interest Rate Hikes on the Financial Crisis Evidence from Emerging Market Economices

The purpose of this paper is to systematically study the economic consequences of this policy adjustment by analysing in depth the five interest rate hike actions of the Federal Reserve and their chain reactions in emerging market economies, applying economic principles and methods. In particular, the central question of concern is whether the Fed's interest rate hiking policy constitutes an important trigger of the financial crisis in emerging markets. In order to shed light on this complex phenomenon in a comprehensive manner, this paper not only analyses in depth the macroeconomic logic behind the Fed's interest rate hike, but also explores its transmission mechanism in emerging market economies, as well as the economic vulnerability of these countries in the face of external shocks. The results of the study show that the collapse of emerging countries as a result of the Fed's interest rate hikes seems to be inevitable, but we can draw insights from it: actively promoting the reform of the international monetary system and supporting the inclusion of more types of currencies in the international trade and investment settlement system has become a common choice, including for some Western countries, as well as the need to continue to optimise the economic structure of the domestic economy and to strengthen the ability to manage and control the comprehensive risks.

Optimization of Consumer Protection and Increase of Virtual Currency Trading in Indonesia: A Study on Financial Services Authority Regulation

This study aims to normatively analyze OJK Regulation Number 3 of 2024, focusing on consumer protection in the context of the increasing trade in virtual currency in Indonesia. This study uses a normative legal research method. The collected legal material is then qualitatively analyzed to describe the problem and answer the study objectives. The results show that OJK Regulation Number 3 of 2024 is crucial in optimizing consumer protection and increasing virtual currency trading in Indonesia. Through the general provisions in OJK Regulation Number 3 of 2024, which cover consumer protection and the sandbox mechanism, the regulation supports responsible testing and development of FinTech innovations. The practical implementation of OJK Regulation Number 3 of 2024, emphasizing personal data protection and transparency, adds a layer of consumer protection. Overall, OJK Regulation Number 3 of 2024 creates an environment conducive to safe and regulated virtual currency trading, enhancing investor and consumer confidence in the Indonesian FinTech ecosystem. Therefore, it is recommended that the government and OJK, FinTech innovators and virtual currency traders, as well as consumers and investors, take strategic steps to enhance consumer protection and optimize virtual currency trading in Indonesia. The Government and OJK need to ensure the effective implementation of OJK Regulation Number 3 of 2024 through widespread socialization, strict supervision, and firm law enforcement against violations. FinTech innovators and virtual currency traders should develop robust risk management systems, enhance operational transparency, and ensure compliance with personal data protection provisions. Consumers and investors are advised to improve their digital financial literacy, critically assess investment risks, and interact only with platforms and service providers that have been verified and comply with OJK regulations. The collaboration between regulators, the industry, and the community will create a safer, more transparent, and sustainable virtual currency trading ecosystem, supporting the growth of the FinTech sector in Indonesia while minimizing potential risks for consumers and investors.

Establishing International Monetary System Version 3.0 to Solve Triffin Dilemma

International Data Currency, abbreviated as Digital Currency, is issued by the United Nations. The first issue of “digital currency”, which anchors globally, is the sum of “foreign exchange cash” + “foreign exchange reserves” + “small amount of gold reserves”. Every year, “digital currency” is issued to anchor the weighted average of the three “data elements” including “①International trade annual increment + ②International investment annual increment + ③United Nations’ annual budget” globally, anchoring no physical assets anymore. Each contracting party of the International Monetary Convention shall apply for “digital currency” from the United Nations in accordance with regulations based on the sum of items ① and ② of their respective fiscal years. On the basis of IMF and others, Monetary Agency of the United Nations is supposed to be established. Besides, the International Data Currency Trading and Settlement Platform is supposed to be established based on SWIFT and other technologies. The United Nations charges a “service fee” for each transaction through various systems, which can replace the membership fee. All external debts of debtor countries shall be exempted. The credit limit of each creditor country shall be fully repaid by the United Nations in digital currency. “International Monetary System Version 3.0” shall be established to solve Triffin Dilemma.

Return and volatility spillovers between non-fungible tokens and conventional currencies: evidence from the TVP-VAR model

This study investigates the static and dynamic return and volatility spillovers between non-fungible tokens (NFTs) and conventional currencies using the time-varying parameter vector autoregressions approach. We reveal that the total connectedness between these markets is weak, implying that investors may increase the diversification benefits of their multicurrency portfolios by adding NFTs. We also find that NFTs are net transmitters of both return and volatility spillovers; however, in the case of return spillovers, the influence of NFTs on conventional currencies is more pronounced than that of volatility shock transmissions. The dynamic exercise reveals that the returns and volatility spillovers vary over time, largely increasing during the onset of the Covid-19 crisis, which deeply affected the relationship between NFTs and the conventional currencies markets. Our findings are useful for currency traders and NFT investors seeking to build effective cross-currency and cross-asset hedge strategies during systemic crises.

Studies Into the Potential Replacement of Swift with Digital Currency: Technology, Regulation, and the Market

With the rapid development of digital currency and blockchain technology, digital currency has attracted widespread attention as a new payment method. As a traditional cross-border payment and settlement method, SWIFT has significant advantages in its market position and technical capabilities. However, as a new payment method, digital currency has the advantages of speed, low cost, and no geographical restrictions, so it may become a substitute for SWIFT. This paper aims to study the possibility of a digital currency replacing SWIFT, focusing on the challenges and opportunities of digital currency in terms of technology, regulation, and market. In terms of technology, this paper would analyze the advantages and disadvantages of digital currency and blockchain technology and explore the technical application of digital currency in cross-border payment and settlement. In addition, this paper would also analyze technical issues, such as the security and scalability of digital currency, and propose corresponding solutions. In terms of regulation, this paper would analyze the regulatory framework and compliance requirements of digital currencies and the status and role of digital currencies in the international financial regulatory system. This paper would also explore the regulatory and compliance issues of digital currency and propose suggestions and solutions for digital currency regulation. In terms of market, this paper would analyze the competitiveness and application potential of digital currency in the international trade and cross-border payment markets, as well as the market prospect and business model of digital currency. In addition, this paper would also analyze the advantages and disadvantages of digital currency and traditional payment methods, as well as the challenges of digital currency in marketing and application. Through the analysis and discussion of technology, regulation, and the market, this paper aims to provide a theoretical and practical basis for digital currency to replace SWIFT and a reference for relevant policy formulation and practice. This paper provides a comprehensive and in-depth analysis and research on the possibility of a digital currency replacing SWIFT, covering technical, regulatory, and market issues. The structure of the thesis is clear, the logic is rigorous, the argument is clear, and it has innovation and practical value. This paper has important theoretical and practical significance in the continuous development and application of digital currency and blockchain technology. It has specific references and inspiration for research and practice in related fields.

Forecasting multi‐frequency intraday exchange rates using deep learning models

AbstractThis paper examines the behavior of currencies' intraday exchange rates with mainly focuses on predicting these behaviors through deep learning models. The time series data are used in this study and comprise intraday exchange rate data for seven volatile currencies, recorded at two different frequency intervals: 1 h and 30 min. The data cover the time frame from January 1, 2018, to December 31, 2020. Firstly, wavelet maximal overlap discreet wavelet transform (MODWT) type “haar” is applied in order to identify the noise representing the volatile trend. Then learning models are applied to historical data that includes support vector regression (SVR), recurrent neural network (RNN), and long short‐term memory (LSTM). The main findings of the study provide strong evidence that the deep learning technique (i.e., LSTM) outperforms the other compatible models. This has been confirmed by the statistical measures for accuracy purposes. This study intends to address complex trends exhibited by volatile behavior of intraday exchange rates through non‐conventional learning techniques for the time of need‐based for the currency traders and other stakeholders.

Opinion Formation in the World Trade Network.

We extend the opinion formation approach to probe the world influence of economical organizations. Our opinion formation model mimics a battle between currencies within the international trade network. Based on the United Nations Comtrade database, we construct the world trade network for the years of the last decade from 2010 to 2020. We consider different core groups constituted by countries preferring to trade in a specific currency. We will consider principally two core groups, namely, five Anglo-Saxon countries that prefer to trade in US dollar and the 11 BRICS+ that prefer to trade in a hypothetical currency, hereafter called BRI, pegged to their economies. We determine the trade currency preference of the other countries via a Monte Carlo process depending on the direct transactions between the countries. The results obtained in the frame of this mathematical model show that starting from the year 2014, the majority of the world countries would have preferred to trade in BRI than USD. The Monte Carlo process reaches a steady state with three distinct groups: two groups of countries preferring to trade in whatever is the initial distribution of the trade currency preferences, one in BRI and the other in USD, and a third group of countries swinging as a whole between USD and BRI depending on the initial distribution of the trade currency preferences. We also analyze the battle between three currencies: on one hand, we consider USD, BRI and EUR, the latter currency being pegged by the core group of nine EU countries. We show that the countries preferring EUR are mainly the swing countries obtained in the frame of the two currencies model. On the other hand, we consider USD, CNY (Chinese yuan), OPE, the latter currency being pegged to the major OPEC+ economies for which we try to probe the effective economical influence within international trade. Finally, we present the reduced Google matrix description of the trade relations between the Anglo-Saxon countries and the BRICS+.

The Dynamics of the Ghanaian Currency Depreciation: A Case Analysis of the Performance of Ghana Cedi (GHC) Against Its Major Trading Currencies

The Dynamics of the Ghanaian Currency Depreciation: A Case Analysis of the Performance of Ghana Cedi (GHC) Against Its Major Trading Currencies

ON THE EFFECTS OF INFORMATION ASYMMETRY IN DIGITAL CURRENCY TRADING

We report on two studies that examine how social sentiment influences information asymmetry in digital currency markets. We also assess whether cryptocurrency can be an investment vehicle, as opposed to only an instrument for asset speculation. Using a dataset on transactions froman exchange in South Korea and sentiment from Korean social media in 2018, we conducted a study of different trading behavior under two cryptocurrency trading market microstructures: a bid-ask spread dealer’s market and a continuous trading buy-sell, immediate trade execution market. Our results highlight the impacts of positive and negative trader social sentiment valences on the effects of information asymmetry on observed trading patterns. This includes the spillover effect of volatile social sentiment, and the leverage effect when a cryptocurrency’s value falls or rises in response to changing sentiment. Our results highlight how volatility arises in parallel with investors’ reactions to public information and trade transaction volume. If the price falls beyond participants’ expectations, a negative shock from new information may lead to more volatile social sentiment than a positive shock of the same size does. Our work supports the roles of investment and speculation for cryptocurrency by identifying an immediate impulse and a longer-term effect of economic variables in the presence of sentiment-led information asymmetry.We contribute new knowledge to the interdisciplinary literature on the financial economics of digital currency for a technological innovation that has matured earlier than many observers may realize.

Exchange rates, invoicing currencies and the margins of exports

We examine effects of currency depreciation on South Korean exporting firms, taking into account invoicing currencies in international trade. Such effects on real exports (intensive margin) and the probability of exporting (extensive margin) are decomposed into invoice-currency adjusted improved price competitiveness, increased costs of imported inputs, and increased burden of foreign-currency debts. We find strong evidence that currency depreciation affects both margins through price competitiveness, and invoice currencies play an important role in explaining such effects. However, evidence for impacts of currency depreciation via the costs of imported inputs and the burden of foreign-currency debt channel is weak.

Conditional Tests for the Profitability of Technical Analysis in Currency Trading and its Economic Fundamentals

Conditional Tests for the Profitability of Technical Analysis in Currency Trading and its Economic Fundamentals