Recent studies suggest that order flow plays an important role in FX
determination and out of sample forecasting. In line with this trend, we use
KRW/USD’ order flow for forecasting its daily variation. We make two
contributions. First, we find JPY/USD, a public information proxy variable,
provides in-sample explanation as well as out-sample forecasting power, which
is very different from the empirical evidence found on the international
currency. Second, we find evidence that order flow can forecast KRW/USD　
exchange rates, although our results show statistically insignificant
improvement of forecasting power compared with the random walk model.
However, the forecasting power improvement is not negligible, which gives
considerable practical usage to market practitioners.