Question 1 [5 marks] You have been asked to select one of the three market views developed by your group in stage 1. Using this market view, devise a speculation strategy that enables your organisation to take advantage of your predicted changes in the exchange rates. You should specify which currencies you will buy or sell. As part of your strategy you must create a portfolio as of 22"d of August 2020. This portfolio will comprise of the currency pair analysed in your market view. Comm / Terms Bid Ask Mid AUD/USD 0.7161 0.7163 0.7162 AUD EUR 0.6069 0.6073 0.6071 EUR/AUD 1.6471 1.6474 1.6473 AUD/GBP 0.5470 0.5473 0.5472 GBP/AUD 1.8275 1.8280 1.8278 AUD/JPY 75.75 75.78 75.77 EUR/USD 1.1795 1.1799 1.1797 GBP/USD 1.3087 1.3092 1.3090 USD/JPY 105.78 105.81 105.80 EUR/GBP 0.9010 0.9015 0.9013 EUR/JPY 124.79 124.83 124.81 GBP/JPY 138.45 138.50 138.48 AUD/CAD 0.9432 0.9440 0.9436EUR/CHE 1.0759 1.0753 GBP CHP 1. 1919 1.1938 FEGIT USINCHE 1.9115 0.91 17 1.9116 USDICAD 1.3175 1.3179 1.3177 NZIMUSD 1.6539 0.6542 0.6541 Table 1: Exchange rates on August 22, 2020. Mid made =[bid rate + ask rabe)/2 The senior management has allocated you 400,000,000 units of currency as the initial balance for your speculation strategy if you are speculating on AUD, GBP, CAD, EUR, NZD, CHF or USD and 25,000,000,000 units if you are speculating on PY. For instance, if you are speculating on AUD/EUR and decided to short the EUR then you have been allocated 400,000,000 EURs for this purpose. The corresponding long position should be calculated using bid/ask rates provided in Table 1. Please note that you must speculate on one currency pair only (two currencies). You must then take long and short positions as of 22" of August 2020 in the respective currencies in accordance with your market view as a price taker [2.5 Marks]. These long and short positions will constitute your porfolio's current opening position. Based on your initial position you must estimate the opening AUD value of your portfolio using the mid rates in Table 1 and update your position summary table below with your speculative position [2.5 Marks] Mid rate = (bid rate + zek rate) 2 Opening Position in Net Net Change in Currency Position AUD Trades Position Position in Position (current) (Current) (Expected) AUD (Expected) (AUD) AUD CAD CHP FUR GEP IPY NZD USD Net Position (AUDI Table 2: FX portfolio position summary Note: Indicate long positions with a positive sign and short positions with a negative sign fe tal V short position of 45,000,000 GBP should be indicated as -45,000,000). Mad nois = (bid rate + ack rate)/2 Go to