When discussing exchange rate forecasting, the inefficient market school of thought would agree that Multiple Choice O investing in forecasting services can improve the foreign exchange market's estimate of future exchange rates. О forward exchange rates are the best possible predictors of future spot exchange rates. О companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates. О the foreign exchange market is efficient at setting forward rates, which are unbiased predictors of future spot rates. О forward exchange rates represent market participants' collective predictions of likely spot exchange rates.
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- When discussing exchange rate forecasting, the inefficient market school of thought would agree that Multiple Choice investing in forecasting services can improve the foreign exchange market's estimate of future exchange rates. forward exchange rates are the best possible predictors of future spot exchange rates. companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates. the foreign exchange market is efficient at setting forward rates, which are unbiased predictors of future spot rates. forward exchange rates represent market participants' collective predictions of likely spot exchange rates.Which of the following statements is (are) FALSE? Select one or more alternatives: Studies suggest that forward exchange rates are unbiased predictors for future spot exchange rates in internationally integrated capital markets. If arbitrageurs have sufficient capital to trade on risk-free opportunities instantaneously, we will see persistent deviations from covered interest parity. If both uncovered interest parity hypothesis and covered interest parity hypothesis hold, we can predict what the spot exchange rate will be in one year from today based on today's one-year forward exchange rate. If forward exchange rates deviate from synthetic forward rates defined by covered interest rate parity, there will be risk-free arbitrage opportunities in efficient capital markets.Which of the following statements is CORRECT? Forward rate should provide more accurate forecasts for currencies in low-inflation countries than the spot rate. The technical forecasting is based on a wide range of data regarded as fundamental economic variables that determine exchange rates. In contrast, the fundamental forecasting focuses on a much smaller set of data, typically the historical exchange rates. O Technical forecasting model can reliably forecast long-run exchange rates. The spot rate is a useful Market-Based Forecast if the expected percentage change in the currency is zero over the forecast period. There are three main types of methods to forecast exchange rates: technical forecasting. fundamental forecasting, and market-based forecasting. These three methods always make the same directional prediction regarding whether a currency is appreciating or
- Exchange rates can move up or down, and spot rates could move favourably as well as adversely. However, many companies prefer to hedge their currency risks by fixing an exchange rate now for a future transaction, even if this means that it will not be able to benefit from any favourable future movement in the exchange rate. Required Discuss the methods of hedging exposures to foreign exchange risk.Which of the following is not an argument for central bank intervention? Exchange rates are highly volatile. Exchange rate fluctuations have an adverse effect on the macroeconomy. The market knows better than economic policy makers what the appropriate level of the exchange rate is. Central bank intervention can smooth out fluctuations in exchange rates.Researchers found that it is very difficult to forecast future exchange rates more accurately than the forward exchange rate or the current spot exchange rate. How would you interpret this finding?
- According to the efficient market school, do the best job at predicting future spot exchange rates.Foreign exchange risk may be best defined as:a. the chance of value change in foreign exchange ratesb. the chance that the demand for your currency will dropc. the chance that exchange rates will be fixedd. the political risk posed by foreign governmentsIdentify the statement as True, False, or Uncertain, and explain your reasoning: Consider a temporary positive inflation shock in a flexible exchange rate regime (with an inflation targeting central bank) and in a fixed exchange rate regime (where there is no policy intervention). Assume that both economies converge to a medium run equilibrium. Following the shock, inflation converges to its equilibrium value from above in both cases.
- Hi, the solution to the last answer was not given above d. Considering current world economic climate, the future exchange rates are uncertain. How would you analyse/anticipate the change in exchange rates? Write your proposal to mitigate impact of possible exchange rate fluctuationsAnswer the following: a. Explain why the interest parity condition must hold if the foreign exchange market is in equilibrium. b. Explain why overshooting occurs. What can the Central Bank do to mitigate its effects?Explain the random walk model for exchange rate forecasting. Can it be consistent with technical analysis?