Research On Correlation Between Exchange Rate And Gold Price Based On Wavelet Analysis

In recent years,the fluctuation of the exchange rate of the RMB has continuously increased.In 2017,the exchange rate of the US dollar against the RMB once exceeded 6.9,and in order to maintain the stability of the foreign exchange market,Chinese government begun to decline the foreign exchange reserves.On the one hand,the fluctuation of the RMB exchange rate represents the relaxation of China's exchange rate system;on the other hand,it also brings invisible exchange rate risks to foreign exchange investors and import and export companies in China.Gold,as a recognized US dollar safe-haven asset,can its ability to hedge risk also play a significant role in the RMB-based investment portfolio? This requires studying the correlation between foreign exchange rates against the RMB exchange rate and gold prices.On the basis of summarizing the past research,this paper uses the wavelet analysis method to decompose the exchange rate and gold price,and obtains the two groups of data fluctuations under different investment horizons;then the correlation analysis is performed on the decomposition data of each investment period.The empirical part of this paper uses the closing price of gold spot Au9995 on the Shanghai Gold Exchange as the gold price data;using the exchange rate of the dollar against the RMB,the exchange rate of the euro against the RMB,the exchange rate of the 100 yen against the RMB,the exchange rate of the GBP against the RMB,the exchange rate of the Australian dollar against the RMB,the exchange rate of the Hong Kong dollar against the RMB 6 indicators serve as data on the exchange rate fluctuation of the RMB.The empirical results of this paper show that the correlation coefficient between the gold price and the US dollar against the RMB and the Hong Kong dollar against the RMB is negative on all time scales,and the correlation is weak.For domestic investors,gold can be used as a hedge for US dollar and Hong Kong dollar investment,but their risk aversion ability is normal.The correlation between the price of gold and the euro,the British pound,the Japanese yen and the Australian dollar against the yuan is positive on all scales,and the correlation coefficient is greater in the mid-to-long term period,indicating that gold cannot be a hedging of exchange rate risk of this currencies.Based on the above analysis results,this paper proposes several suggestions at the end,hoping to help our foreign exchange investors and import and export companies to reasonably avoid exchange rate risks.