Exam 10: The Foreign Exchange Market

Assume that the interest rate on borrowings in India is 1 percent while the interest rate on bank deposits in a U.S.bank is 6 percent.John,an active currency trader borrows in Japanese yen,converts the money into U.S.dollars and deposits it in a U.S.bank.The speculative element of John's carry trade is that its success is based upon his belief that

Which approach to forecasting exchange rate movements uses price and volume data to determine past trends?

Describe the difference between fundamental analysis and technical analysis in forecasting exchange rate movements.

Differentiate between spot exchange rates and forward exchange rates.

Explain the concepts of transaction exposure and translation exposure.