3. Forward Exchange Rates [LO1] Use the information in Figure 21.1 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 Canadian dollars in U.S. dollars per Canadian dollar? 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 Canadian dollar, based on the information in the figure? Explain. U.S.-dollar foreign-exchange rates in late New York trading June 13, 2008 Country/currency Fri in US$ per US$ US$ vs, YTD chg (%) US$ vs, Fri- YTD chg Country/currency in US$ per US$ (%) Americas Europe Argentina peso* Brazil real Canada dollar .3290 3.0395 -3.5 Czech Rep. koruna** .06351 15.746 -13.4 .6115 1.6353 -8.1 Denmark krone .2060 4.8544 -5.0 .9716 1.0292 3.6 Euro area euro 1.5363 .6509 -5.0 1-mos forward .9712 1.0297 3.7 3-mos forward 6-mos forward .9706 1.0303 .9705 1.0304 3.7 3.8 Hungary forint .006240 160.26 -7.5 Norway krone .1909 5.2383 -3.6 Chile peso Colombia peso Ecuador US dollar Mexico peso** Peru new sol Uruguay peso+ Venezuela b. fuerte .002009 497.76 unch .0005873 1702.71 -15.6 1 1 unch .0965 10.3584 -5.1 .3468 2.884 -3.8 .05140 19.46 -9.7 .466287 2.1446 unch Poland zloty Russia ruble Slovak Rep koruna Sweden Krona Switzerland franc 1-mos forward 3-mos forward .4533 2.2060 -10.6 .04203 23.793 -3.2 .05084 19.670 -14.5 Asia-Pacific 6-mos forward Turkey lira** Australian dollar .9388 1.0652 -6.6 UK pound .1640 6.0976 -5.7 .9531 1.0492 -7.4 .9533 1.0490 -7.2 .9536 1.0487 -7.0 .9544 1.0478 -6.7 .7976 1.2538 7.4 1.9474 .5135 2.0 China yuan .1449 6.9020 -5.5 1-mos forward 1.9431 .5146 2.2 Hong Kong dollar .1280 7.8130 0.2 3-mos forward 1.9339 .5171 2.5 India rupee Indonesia rupiah Japan yen 1-mos forward .02332 42.882 .0001074 9311 -0.8 .009241 108.21 -2.9 .009257 108.03 -2.7 8.8 6-mos forward 1.9215 .5204 2.8 Middle East/Africa Bahrain dinar 2.6529 .3769 0.2 3-mos forward 6-mos forward Malaysia ringgits New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won .3051 3.2776 .7494 1.3344 2.3 .01496 66.845 .0225 44.484 7.9 .7245 1.3803 .0009576 1044.28 .009292 107.62 -2.5 .009349 106.96 -2.3 -0.9 Egypt pound* .1869 5.3496 -3.3 Israel shekel .2928 3.4153 -11.4 Jordan dinar 1.4114 8.4 Kuwait dinar Lebanon pound .7085 unch 3.7595 .2660 -2.7 .0006614 1511.94 unch -4.2 Saudi Arabia riyal .2666 3.7509 unch 11.6 Taiwan dollar .03285 30.441 -6.1 South Africa rand UAE dirham .1233 8.1103 18.5 .2723 3.6724 unch Thailand baht .03013 33.190 10.5 Vietnam dong .00006020 16611 3.6 SDR** 1.6058 .6227 -1.7