Question 1: Using the American term quotes from Exhibit 5.4, on page 121 to calculate a cross-rate matrix for the euro, Swiss franc, Japanese yen,
Question 1:
Using the American term quotes from Exhibit 5.4, on page 121 to calculate a cross-rate matrix for the euro, Swiss franc, Japanese yen, and the British pound so that the resulting triangular matrix is similar to the portion above the diagonal in Exhibit 5.6, on page 123 (page number from the 6e version of textbook, if you cannot find it, please let me know.) Also, please see example to calculate the matrix on page 122. (SEE BELOW)
1. A CD/$ bank trader is currently quoting a small figure bid-ask of 35-40, when the rest of the market is trading at CD1.3436-CD1.3441. What is implied about the traders beliefs by his prices? Provide a clear calculation.
Question 2:
2. What is meant by a currency trading at a discount or at a premium in the forward market? Provide supportive information. How does this affect the currency trading?
EXHIBIT 5.4 Exchange Rates Currencies June 2, 2010 U.S.-dollar foreign-exchange rates in late New York trading Wed in US$ Per US$ Wed in US$ Per US$ Country/currency Americas Argentina peso* Brazil real Canada dollar 1-mos forward 3-mos forward 6-mos forward Chile peso Colombia peso Ecuador US dollar Mexico peso* Peru new sol Uruguay pesot Venezuela b. fuerte .2546 .5481 .9629 .9628 .9624 .9614 .001869 .0005084 1 .0782 .3514 .05250 .232851 3.9277 1.8245 1.0385 1.0386 1.0391 1.0401 535.05 1966.96 1 12.7828 2.846 19.05 4.2946 Country/currency Europe Czech Rep. koruna Denmark krone Euro area euro 1-mos forward 3-mos forward 6-mos forward Hungary forint Norway Krone Poland zloty Russia rublet Sweden krona Switzerland franc 1-mos forward 3-mos forward 6-mos forward Turkey lira** UK pound 1-mos forward 3-mos forward 6-mos forward .04765 .1645 1.2238 1.2242 1.2251 1.2260 .004446 .1545 .2993 .03209 .1282 .8662 .8671 .8686 .8715 .6336 1.4655 1.4655 1.4658 1.4661 20.986 6.0790 .8171 .8169 .8163 .8157 224.92 6.4725 3.3411 31.162 7.8003 1.1545 1.1533 1.1513 1.1474 1.5782 .6824 .6824 .6822 .6821 Asia-Pacific Australian dollar China yuan Hong Kong dollar India rupee Indonesia rupiah Japan yen 1-mos forward 3-mos forward 6-mos forward Malaysia ringgit New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Taiwan dollar Thailand baht Vietnam dong .8422 .1464 .1283 .02132 .0001085 .010854 .010859 .010871 .010893 .3037 .6820 .01170 .0215 .7118 .0008217 .03106 .03069 .00005267 1.1874 6.8298 7.7933 46.904 9217 92.13 92.09 91.99 91.80 3.2927 1.4663 85.470 46.490 1.4049 1216.99 32.196 23.584 18988 Middle East/Africa Bahrain dinar Egypt pound* Israel shekel Jordan dinar Kuwait dinar Lebanon pound Saudi Arabia riyal South Africa rand UAE dirham 2.6526 .1765 2593 1.4099 3.4477 .0006662 .2666 .1305 .2723 .3770 5.6648 3.8565 .7093 .2900 1501.05 3.7509 7.6628 3.6724 SDR + 1.4659 .6822 EXHIBIT 5.6 Key Cross-Currency Rates USD EUR JPY GBP CHF CAD AUD NZD HKD NOK SEK Sweden 7.8031 9.5496 08470 11.432 6.7566 7.5047 6.5616 5.3171 1.0012 1.2055 Norway 6.4729 7.9216 07026 9.4833 5.6048 6.2253 5.4431 4.4107 83055 .82953 Hong Kong 7.7935 9.5378 .08459 11.418 6.7483 7.4954 6.5536 5.3105 1.2040 .99877 New Zealand 1.4676 1.7960 .01593 2.1501 1.2707 1.4114 1.2341 .18831 .22672 18807 Australia 1.1892 1.4554 .01291 1.7423 1.0297 1.1437 .81033 .15259.18372 .15240 Canada 1.0398 1.2725 .01129 1.5233 .90032 .87434 .70850 .13341 .16063 .13325 Switzerland 1.1549 1.4134 .01254 1.6920 1.1107 .97114 .78694 .14819.17842 . 14800 U.K. .68256 .83532 .00741 .59102 .65645 57396 46510 .08758 .10545 .08747 Japan 92.130 112.75 134.98 79.774 88.606 77.472 62.778 11.821 14.233 11.807 Euro .81712 .00887 1.1971.70753 .78587 .68711 .55679 10485 .12624 . 10472 U.S. 1.2238 .01085 1.4651 .86589 .96175 .84090 .68140 .12831 .15449 .12812 Source: Composite 4 p.m. et values on June 2, 2010, from Bloomberg
