Question: b) Critically assess FIVE different factors which can influence currency exchange rates. Your answer should include how the factor influences currency exchange rates and the

b) Critically assess FIVE different factors which can influence currency exchange rates. Your answer should include how the factor influences currency exchange rates and the significance and prevalence of their influence. (5 marks) Sky Ltd, located in United Kingdom, is going to hedge a $5 million payment due in 5 months. The trader has gathered the following information regarding possible hedges against currency risk. So: $1.3835 - 1.3855/ S5months $1.4328 - $1.4408/ 5mth Forward: 0.56 -0.68c/ discount Borrowing rates (pa): US 7%, UK 6.25% Deposit rates (pa): US 4.5%, UK 3.75% Opening Futures Price: $1.3810/ (Contract size = 62,500) Closing Futures Price: $1.3848/

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