This thesis aimes at examining customer order flow in the Norwegian currency market (NOK/EUR). The key findings suggest heterogeneity among market participants, where non–financial customers’ order flow is the primary information source that drives price movements and foreign banks’ transaction flow provide liquidity in the market. However, the segments’ effect on price is non-permanent. Further evidence indicates that the transaction flow is complimentary to the traditional fundamentals when modeling the exchange rate. The out of sample findings indicate that order flow based models perform better than a random walk and a traditional model for statistical forecasts
