As a trader working for a large investment bank, you have observed that the /$ spot rate has been steady and that both the dollar and yen interest rates have remained relatively fixed over the past week. The following information is available to you

Spot exchange rate: 180-day forward exchange rate: 180-day yen interest rate: 180-day dollar interest rate:

110.20/$ 109.80/$ 1.8% p.a. 3.0% p.a.

The common prediction in the market is that the /$ spot rate will remain close to 110.00/$ for the coming 180 days. You can borrow 220.4m from a Japanese bank. Is there uncovered interest arbitrage potential? (8 marks)