Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 0.14 0.70 OTT D.BD AUD/USD NED/USD USDUPY TO 0.79 9 0.72 191 100 100 9 101 122 1.23 1.25 127 1.28 1.30 131 1.40 140 145 141 1.48 091 0.91 0.31 0.91 0:52 0.91 091 1.2 LT 126 1.25 1.25 EUR USD GBPUSD USDICHE USD CAD USD CNY Australian Cross Rates MUDINZO AUDUPY G.TO 6.55 5.50 6.45 6:40 6.35 3D 1.13 1.13 113 112 111 112 1.11 111 76 78 77 77 78 78 0.61 0.61 0.61 0.62 0.62 Dul 061 AUD/EUR AUD GBP 0.55 0.54 0.54 0.54 0.67 0.69 Q.TO 0.71 0.71 0.72 0.73 0.73 AUDCHF AUD CAD AUDINY 1.00 5.04 5.03 5.05 504 5.06 5.04 Effective 28 September 2020 You are given foreign currency forecasts for a number of currency pairs in Table 1. You are a forex trader and wish to use the forecasts for September 2021 to make a profit. Required (a) (0) Obtain spot rates for five currency pairs chosen from those listed in table 1. Please specify the date and time at which you obtained the quotes (5 marks) II)) Which currency pairs indicate profit opportunities if you buy at the spot rate indicated in your answer a) and sold at the predicted rate shown in table 1? (3 marks) I) Which currency pair gives the highest rate of return? (2 marks) b) () Obtain forward rates for five chosen currency pairs from table 1 with a maturity of September 2021. (5 marks) (ii) Compare the forward rates obtained in b) (1) above to the predicted spot rate in Table 1. Assuming that the predictions in Table 1 are accurate, does it point to profit making opportunities? That is can you buy at the forward rate and sell at the forecast spot rate to make a profit? Alternately, can you sell at the forward rate and buy at the predicted spot rate to make a profit? Assume that you have AUD 1 million for the trade and show your profit calculations for three currency pairs. (15 marks) c) Choose three currency pairs with AUD on one side. Obtain the government interest rates for the three foreign countries on the other side of the forex quotes. Using this data in addition to those obtained in a) and b) above, verify if interest rate parity holds. You may draw additional data if https://www.wsj.com/market-data/bonds/govern On-campus students may choose to obtain spot rate data from the IRESS trading room. Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 0.66 0.67 0.68 0.69 0.70 0.70 NZD/USD 0.72 0.72 103 103 100 100 100 99 USD/JPY 98 98 1.22 EUR/USD 1.23 1.25 1.26 1.27 1.28 1.30 1.31 1.36 GBP/USD 1.40 1.40 1.43 1.44 1.45 1.47 1.48 0.91 USD/CHF 0.91 0.91 0.91 0.91 0.92 0.91 0.91 USD/CAD 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CNY 6.70 6.60 6.55 6.50 6.45 6.40 6.35 6.30 Australian Cross Rates AUD/NZD 1.13 1.13 1.12 1.11 1.12 1.11 AUD JPY 76 28 78 79 78 78 AUD/EUR 0.61 0.61 0.62 0.62 0.61 0.62 AUD/GBP 0.54 0.54 0.55 154 0.54 1.54 0:54 0.54 AUD/CHE 0.62 0.89 0.72 0.73 0.73 AUD CAD 1.95 099 0.39 0.99 1.00 1.00 AUD CNY 4.49 5:04 5:05 5:06 5.04 Effective 28 September 2020 Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 0.14 0.70 OTT D.BD AUD/USD NED/USD USDUPY TO 0.79 9 0.72 191 100 100 9 101 122 1.23 1.25 127 1.28 1.30 131 1.40 140 145 141 1.48 091 0.91 0.31 0.91 0:52 0.91 091 1.2 LT 126 1.25 1.25 EUR USD GBPUSD USDICHE USD CAD USD CNY Australian Cross Rates MUDINZO AUDUPY G.TO 6.55 5.50 6.45 6:40 6.35 3D 1.13 1.13 113 112 111 112 1.11 111 76 78 77 77 78 78 0.61 0.61 0.61 0.62 0.62 Dul 061 AUD/EUR AUD GBP 0.55 0.54 0.54 0.54 0.67 0.69 Q.TO 0.71 0.71 0.72 0.73 0.73 AUDCHF AUD CAD AUDINY 1.00 5.04 5.03 5.05 504 5.06 5.04 Effective 28 September 2020 You are given foreign currency forecasts for a number of currency pairs in Table 1. You are a forex trader and wish to use the forecasts for September 2021 to make a profit. Required (a) (0) Obtain spot rates for five currency pairs chosen from those listed in table 1. Please specify the date and time at which you obtained the quotes (5 marks) II)) Which currency pairs indicate profit opportunities if you buy at the spot rate indicated in your answer a) and sold at the predicted rate shown in table 1? (3 marks) I) Which currency pair gives the highest rate of return? (2 marks) b) () Obtain forward rates for five chosen currency pairs from table 1 with a maturity of September 2021. (5 marks) (ii) Compare the forward rates obtained in b) (1) above to the predicted spot rate in Table 1. Assuming that the predictions in Table 1 are accurate, does it point to profit making opportunities? That is can you buy at the forward rate and sell at the forecast spot rate to make a profit? Alternately, can you sell at the forward rate and buy at the predicted spot rate to make a profit? Assume that you have AUD 1 million for the trade and show your profit calculations for three currency pairs. (15 marks) c) Choose three currency pairs with AUD on one side. Obtain the government interest rates for the three foreign countries on the other side of the forex quotes. Using this data in addition to those obtained in a) and b) above, verify if interest rate parity holds. You may draw additional data if https://www.wsj.com/market-data/bonds/govern On-campus students may choose to obtain spot rate data from the IRESS trading room. Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 0.66 0.67 0.68 0.69 0.70 0.70 NZD/USD 0.72 0.72 103 103 100 100 100 99 USD/JPY 98 98 1.22 EUR/USD 1.23 1.25 1.26 1.27 1.28 1.30 1.31 1.36 GBP/USD 1.40 1.40 1.43 1.44 1.45 1.47 1.48 0.91 USD/CHF 0.91 0.91 0.91 0.91 0.92 0.91 0.91 USD/CAD 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CNY 6.70 6.60 6.55 6.50 6.45 6.40 6.35 6.30 Australian Cross Rates AUD/NZD 1.13 1.13 1.12 1.11 1.12 1.11 AUD JPY 76 28 78 79 78 78 AUD/EUR 0.61 0.61 0.62 0.62 0.61 0.62 AUD/GBP 0.54 0.54 0.55 154 0.54 1.54 0:54 0.54 AUD/CHE 0.62 0.89 0.72 0.73 0.73 AUD CAD 1.95 099 0.39 0.99 1.00 1.00 AUD CNY 4.49 5:04 5:05 5:06 5.04 Effective 28 September 2020