| Summary: | 碩士 === 輔仁大學 === 金融研究所 === 91 === The purpose of this research is, from the viewpoint of FX traders, to identify factors that influence the USD/TWD spot rates, how these factors impact the USD/TWD spot rates, and the adjustment speed to achieve new balance in case imbalance occurs. This research is implemented by interviewing several FX traders in Taipei and asking some FX traders in Taipei to fill in a questionnaire which is designed according to general foreign exchange determination theories.
The questionnaire is composed of six parts. First, respondents’ profile. Second, the influence of macroeconomic factors on the USD/TWD spot rate and the adjustment speed to achieve balance once macroeconomic factors cause imbalance in the FX market. Third, the influence of non-macroeconomic factors on the levels of short-, medium-, and long-term USD/TWD spot rates. Fourth, the relationship between the central bank’s intervention and the volatility of the USD/TWD spot rates. Fifth, the reasons for and timing of the deviation of the interbank bid-offer spreads from their normal levels. Sixth, the predictability of the USD/TWD spot rates from traders’ perspective.
The responses on the returned questionnaires are quantified to numerical indexes according to Likert Scale, and then examined with ANOVA and Scheffe multiple comparison method. The conclusions this research reaches are as follows.
When it comes to the impact of macroeconomic factors on the change in the USD/TWD spot rates, the spot traders’ thoughts agree with what economic theories portray. Among the factors, the balance of the current account and that of the capital account are considered the most crucial. However, one interesting thing discovered in this research is that traders in local banks and those in foreign banks are apparently divided on how the balance of the current account influences the USD/TWD spot rates.
About the adjustment speed for the USD/TWD market to achieve equilibrium from inequilibrium caused by exogenous disturbing factors, traders believe that the new equilibrium can be achieved only in the medium to long run. Among all the exogenous disturbing factors that result in inequilibrium, the interest rate clearly causes the rapidest adjustment process than any other factors.
As far as non-macroeconomic factors are concerned that influence the USD/TWD spot rates, the speculative actions in the market and market participants’ reaction to real-time news are the two most important short-term factors. And the most important medium- to long-term factors are economic fundamentals.
Regarding the intervention by the central bank, FX traders in Taipei agree that the central bank can accomplish its objective to intervene and that the intervention does increase fluctuation in the market. But they disagree that the timing of the intervention by the central bank is appropriate or that the intervention can bring the USD/TWD spot rates to a reasonable level of equilibrium.
With respect to the bid-offer spreads of the USD/TWD spot quotes by interbank traders, the average spreads are 6.26 pips. And the spreads of quotes by traders in local banks and those by traders in foreign banks are very similar. No statistically significant difference in the spreads is detected. When asked if they will quote two-way prices whose bid-offer spreads are deviant from conventional market practice, 61 respondents, or 63.54% of all respondents, indicate that they never do so while the rest 35 respondents, or 36.46% of all respondents, indicate that it is likely for them to do so. The most distinct timing of quoting wider bid-offer spreads is when the market is just open in the morning, followed by when the market is influenced by unexpected events, when important information is going to be released or is just being released, and when the fluctuation in the market surges. And the common occasions for traders to quote narrower bid-offer spreads are when they get prices of narrower bid-offer spreads from their counterparties and when the market is very quiet.
Lastly, concerning the predictability of the USD/TWD spot rates, traders believe that the shorter the period of time to be forecast, the more predictable the spot rates. Traders also think that it is very difficult to predict long-term trends of the USD/TWD spot rates.
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