Use the information in Figure 20.1 to answer the following questions:
a. What is the six-month forward rate for the Japanese yen in yen per U.S. dollar? Is the yen selling at a premium or a discount? Explain.
b. What is the three-month forward rate for British pounds in U.S. dollars per pound? Is the dollar selling at a premium or a discount? Explain.
c. What do you think will happen to the value of the dollar relative to the yen and the pound, based on the information in the figure? Explain.
Figure 20.1
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Currencies U.S.-dollar foreign-exchange rates in late New York trading May 7, 2010 US$vs, FriYTD chg în US$ YTD chg Country/currency per US$ (%) Country/currency Thailand baht in US$ per US$ (3) 03099 32.269 33 Vietnam dong 00005263 19000 28 Americas Argentina peso2568 .8941 2.5 Brazilreal Canada dollar 5422 1.8443 5 Europe 9579 10440 0.7 Czech Rep. koruna 04963 20149 9.3 9580 10438 07 Denmarkkrone 9580 10438 -07 Euro area euro 9574 10445 0.7 Hungary forint 004551 219.73 16.3 1710 5.8480 12.5 1.2731 7855 12.5 1-mos forward 3-mos forward 6-mos forward Chile peso Colombia peso 0004940 2024.29 Ecuador US dollar Mexico peso Peru new sol Uruguay pesot Venezuela b.fuerte 232851 4.2946 001876 533.05 51 Norway krone Poland zloty 1 unch Russia rublet 1604 6.2344 7.5 3078 3.2489 13.3 03278 30.506 0.6 1302 7.6805 7.3 9022 11084 7.1 9029 1.1075 7.0 9046 1.1055 6.8 9070 1.1025 6.6 6399 1.5627 4.4 1.4821 6747 9.1 0.9 0776 12.8833 15 Sweden krona 3504 2.854 1.2 Switzerland franc 05130 19.49 02 1-mos forward 3-mos forward 6-mos forward 100.0 Turkeyira* UK pound Asia-Pacific Australiandollar China yuan Hong Kong dollar1285 7.7824 0.4 India rupee Indonesia rupiah 0001088 9191 2.5 Middle East/Africa Japan yen dollar 8863 11283 14 mosforward41 6747 9.0 1.4820 6748 9.0 02195 45.558 -18 -mos torward 14818 6749 9.0 1465 6.8257 unch 3-mos forward 010940 9141 18 Bahrain dinar 2.6526 3770 unch 1786 5.6000 2.1 2633 3.7979 0.2 141297078 unch 3.45322896 0.9 New Zealand dollar 7135 14015 17 Lebanon pound 0006662 1501.05 0.1 mos forward 010945 137 -18 Eayptpound 3-mos forward 010957 91.27 -19 Israel shekel 6-mos forward 10979 91.08 20 Jordan dinar Malaysia ringgit 3059 3.2690 4.5 Kuwat dinar Pakistan rupee Philippines peso Singapore dollar South Korea won Taiwan dollar 01186 84.317 01 Saudi Arabiariyal 2666 3.7509 unch 0219 45.683 17 South Africarand 1303 7.6746 3.6 7163 1.396 .7 UAE dirham 2723 3.6724 unch 0008655 1155.40 -0.9 03147 31.776 0.7 SDR 14884 6719 5.3 *Floating rate tFinancial SGovernment rate Russian Central Bank rate Rebased as of Jan 1, 2005 T+Special Drawing Rights (SDR);from the International Monetary Fund; based on exchange rates for U.S., British and Japanese currencies. Note:Basedon trading among banks of $1 million and more, as quoted at 4p.m. ET by Reuters.