Customer foreign exchange orders: when timing really does matter

This paper investigates customer foreign exchange (FX) transactions to learn if there are any groups of customers whose transactions are related to subsequent FX rate changes. We use a unique data set from an Australian commercial bank with every customer FX trade in the spot Australian Dollar/US Dollar market between 2005 and 2010. We use Monte Carlo simulation to generate benchmark expected cash flows for each individual customer. This enables us to determine whether that customer’s transaction history is well-timed and therefore potentially relevant for FX determination. We find very few customers whose transactions appear well-timed, given subsequent FX rate changes.