JC bank in Japan has committed to deliver yen in 3 months to MT Ltd in US, a corporate customer. The spot rate is 118 yen to the dollar and the 3-month forward rate is 106 yen per dollar. In recent years, there are an increasing trading dealing with foreign currency in JC bank.

Required:

1. Are there costs to hedging this exposure with the forward market? Explain. (10 marks)
2. Explain FIVE (5) reasons about the level of foreign currency trading has increased in JC bank? (15 marks)