In July2005, China started RMB exchange rate reform which aimed at improving the formation mechanism of RMB exchange rate, then, RMB exchange rate started floating. For a long time after that, Renminbi has appreciated continuously relative to the dollar. In2014, RMB exchange rate against the dollar ended the long time lasted appreciating, and began to float Bi-directionally, which means that foreign investors in China and import and export Enterprise will face greater foreign currency risks. Meanwhile, as gold has a double nature of commodities and financial assets, and was Dollar-denominated, in theory and practice, gold’s safe haven status against US dollars has been confirmed.Based on previous study, this paper studies the Correlation relationship between gold price and US dollar exchange rates. In order to discuss whether gold’s hedge ability against US dollar’s depreciation changes over time, this paper created a semi-parameters time-varing copula model, to calculate the dynamic correlation between gold price and US dollar exchange rate. Meanwhile, this paper uses a threshold regression model to test the spillover effect between the two variables.Empirical results show that, the average dependence and tail dependence between gold price and US dollar exchange rate (US dollar per other currencies) remain positive over time, which means gold could be used as both hedge and safe haven. The dynamic correlation decreased during the crisis period, demonstrating gold’s hedge ability against US dollar depreciation is weaken in crisis period. The spill-over effect from US dollar exchange rate to gold price is statistically significant, and becomes weaker during the crisis period.This paper also verifies the gold’s hedge effect against US dollar exchange rate, the results show that gold’s hedge effects against euro/USD and AUD/USD are better than other exchange rate, and gold’s hedge effect against RMB/USD is bad. This reminds China should provide more foreign currency derivatives to help chinese investors and enterprises avoid risks. |