Question 1

You are given foreign currency forecasts for a number of currency pairs in Table 1. You are a forex trader and wish to use the forecasts for September 2021 to make a profit. Required

(a)

(i) Obtain spot rates for five currency pairs chosen from those listed in table 1. Please specify the date and time at which you obtained the quotes.

ii) Which currency pairs indicate profit opportunities if you buy at the spot rate indicated in your answer a) and sold at the predicted rate shown in table 1?

( iii) Which currency pair gives the highest rate of return?

b)

(i) Obtain forward rates for five chosen currency pairs from table 1 with a maturity of September 2021.

(ii) Compare the forward rates obtained in b) (i) above to the predicted spot rate in Table 1. Assuming that the predictions in Table 1 are accurate, does it point to profit making opportunities? That is can you buy at the forward rate and sell at the forecast spot rate to make a profit? Alternately, can you sell at the forward rate and buy at the predicted spot rate to make a profit? Assume that you have AUD 1 million for the trade and show your profit calculations for three currency pairs.

c) Choose three currency pairs with AUD on one side. Obtain the government interest rates for the three foreign countries on the other side of the forex quotes. Using this data in addition to those obtained in a) and b) above, verify if interest rate parity holds. You may draw additional data if required.

please, answer all parts (a , b ,and c ) and step by step and in a very clear way

Australia 3 Year Government Bond QUOTES & COMPANIES TMBMKAU-03Y (Tullett Prebon) VIEW ALL COMPANIES 1 D 5 D 1M 3M YTD 14 3Y YIELD 4:30 PM AEDT 10/19/20 1 Day Range 0.133 - 0.143 YIELD 0.141% 52 Week Range (Yield) 0.129 - 0.936 (10/07/20 - 12/31/19) 0.15% 0.006 ruhn 0.14% PRICE Coupon 5.500% 113.358 -0.029 (-0.03%) 0.13% Maturity 04/21/23 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.134 Prior Close (Yield) 0.140 1 Day Price Chg TMBMKAU-03Y -0.03% Japan 10 Year -0.03% U.S. 10 Year -0.06% Germany 10 Year 0.05% A DATE OPEN HIGH LOW CLOSE 10/19/20 0.134 0.143 0.133 0.140 10/16/20 0.147 0.147 0.134 0.134 10/15/20 0.153 0.160 0.130 0.147 10/14/20 0.149 0.156 0.147 0.153 10/13/20 0.149 0.152 0.141 0.149 10/12/20 0.149 0.154 0.145 0.149 10/09/20 0.150 0.155 0.141 0.149 10/08/20 0.144 0.163 0.138 0.150 10/07/20 0.173 0.173 0.129 0.144 10/06/20 0.181 0.193 0.171 0.173 10/02/20 0.191 0.191 0.170 0.178 10/01/20 0.170 0.198 0.170 0.191 09/30/20 0.167 0.183 0.167 0.170 09/29/20 0.163 0.172 0.161 0.167 09/28/20 0.175 0.175 0.162 0.163 09/25/20 0.175 0.187 0.167 0.175 09/24/20 0.181 0.193 0.174 0.175 09/23/20 0.217 0.227 0.168 0.181 09/22120 0.236 0.243 0.217 0.217 09/21/20 0.241 0.241 0.233 0.236 QUOTES & COMPANIES Q Australia 1 Year Government Bond TMBMKAU-01Y (Tullett Prebon) VIEW ALL COMPANIES 1D 5D 1M 3M YTD 1 Y 3Y 4:30 PM AEDT 10/19/20 YIELD 1 Day Range 0.104 - 0.110 YIELD 0.106% 52 Week Range (Yield) 0.101 - 0.948 (10/07/20 - 01/02/20) 0.110% -0.004 Marina 0.105% PRICE Coupon 2.000% 102.208 -0.001 (0.00%) 0.100% Maturity 12/21/21 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.110 Prior Close (Yield) 0.106 1 Day Price Chg TMBMKAU-01Y 0.00% Japan 10 Year -0.04% U.S. 10 Year -0.07% Germany 10 Year 0.05% DATE OPEN HIGH LOW CLOSE 10/19/20 0.110 0.110 0.104 0.106 10/16/20 0.111 0.111 0.105 0.110 10/15/20 0.108 0.116 0.105 0.111 10/14/20 0.110 0.113 0.108 0.108 10/13/20 0.109 0.113 0.107 0.110 10/12/20 0.112 0.112 0.106 0.109 10/09/20 0.114 0.116 0.109 0.112 10/08/20 0.109 0.126 0.102 0.114 10/07/20 0.122 0.122 0.101 0.109 10/06/20 0.119 0.130 0.117 0.122 10/02/20 0.126 0.126 0.115 0.121 10/01/20 0.120 0.135 0.120 0.126 09/30/20 0.121 0.128 0.119 0.120 09/29/20 0.122 0.124 0.117 0.121 09/28/20 0.116 0.144 0.116 0.122 09/25/20 0.116 0.127 0.114 0.116 09/24/20 0.140 0.140 0.116 0.116 09/23/20 0.150 0.158 0.139 0.140 09/22/20 0.160 0.163 0.149 0.150 09/21/20 0.161 0.162 0.155 0.160 Buy Sell AD1 Forex market at a glance Pair Last Open High Low Chg. - Chg.% Time + EUR/USD 1.1722 1.1721 1.1725 1.1703 +0.0004 +0.03% 18:58:05 + GBP/USD 1.2973 1.2913 1.2979 1.2897 +0.0060 +0.46% 18:58:06 USD/JPY 105.39 105.38 105.50 105.34 -0.01 -0.00% 18:58:07 USD/CHF 0.9146 0.9149 0.9166 0.9144 0.0000 +0.01% 18:58:05 + AUD/USD 0.7097 0.7077 0.7108 0.7073 +0.0017 +0.24% 18:58:03 EUR/GBP 0.9035 0.9069 0.9089 0.9023 -0.0033 -0.36% 18:58:04 USD/CAD 1.3182 1.3191 1.3195 1.3169 -0.0005 -0.04% 18:58:03 + NZD/USD 0.6625 0.6603 0.6630 0.6602 +0.0021 +0.32% 18:58:05 + EUR/JPY 123.55 123.54 123.64 123.36 +0.02 +0.02% 18:58:04 + GBP/JPY 136.74 136.17 136.86 135.93 +0.54 +0.40% 18:58:03 Performance Table Percent Change PIP Change Pair 15 Minutes Hourly Daily, 1 Week - 1 Month YTD 3 Years EUR/USD 0.05% 0.17% 0.05% -0.75% -0.95% 4.57% -0.52% GBP/USD -0.01% 0.23% 0.49% -0.67% 0.47% -2.15% -1.62% USD/JPY 0.00% -0.03% 0.00% 0.10% 0.82% -2.96% -7.14% USD/CHF -0.01% -0.20% 0.00% 0.60% 0.33% -5.52% -7.08% AUD/USD 0.03% 0.08% 0.27% -1.50% -2.61% 1.10% -9.21% EUR/GBP 0.04% -0.08% -0.37% -0.09% -1.41% 6.91% 1.10% USD/CAD 0.00% -0.04% -0.05% 0.53% -0.18% 1.48% 4.39% NZD/USD 0.01% 0.09% 0.34% -0.29% -1.97% -1.66% -4.94% EUR/JPY 0.05% 0.13% 0.04% -0.65% -0.15% 1.47% -7.62% GBP/JPY -0.00% 0.20% 0.43% -0.55% 1.30% -5.10% -8.64% Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 NZD/USD 0.66 0.67 0.68 0.69 0.70 0.70 0.72 0.72 USD/JPY 103 103 100 100 100 99 98 98 EUR/USD 1.22 1.23 1.25 1.26 1.27 1.28 1.30 1.31 GBP/USD 1.36 1.40 1.40 1.43 1.44 1.45 1.47 1.48 USD/CHF 0.91 0.91 0.91 0.91 0.91 0.92 0.91 0.91 USD/CAD 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CNY 6.70 6.60 6.55 6.50 6.45 6.40 6.35 6.30 Australian Cross Rates AUD/NZD 1.13 1.13 1.13 1.12 1.11 1.12 1.11 1.11 AUD/JPY 76 78 77 77 78 78 78 78 AUD/EUR 0.61 0.61 0.62 0.61 0.62 0.62 0.61 0.61 AUD/GBP 0.54 0.54 0.55 0.54 0.54 0.54 0.54 0.54 AUD/CHF 0.67 0.69 0.70 0.71 0.71 0.72 0.73 0.73 AUD/CAD 0.97 0.98 0.99 0.99 0.99 0.99 1.00 1.00 AUD/CNY 4.96 4.99 5.04 5.03 5.05 5.04 5.06 5.04 Effective 28 September 2020 Australia 3 Year Government Bond QUOTES & COMPANIES TMBMKAU-03Y (Tullett Prebon) VIEW ALL COMPANIES 1 D 5 D 1M 3M YTD 14 3Y YIELD 4:30 PM AEDT 10/19/20 1 Day Range 0.133 - 0.143 YIELD 0.141% 52 Week Range (Yield) 0.129 - 0.936 (10/07/20 - 12/31/19) 0.15% 0.006 ruhn 0.14% PRICE Coupon 5.500% 113.358 -0.029 (-0.03%) 0.13% Maturity 04/21/23 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.134 Prior Close (Yield) 0.140 1 Day Price Chg TMBMKAU-03Y -0.03% Japan 10 Year -0.03% U.S. 10 Year -0.06% Germany 10 Year 0.05% A DATE OPEN HIGH LOW CLOSE 10/19/20 0.134 0.143 0.133 0.140 10/16/20 0.147 0.147 0.134 0.134 10/15/20 0.153 0.160 0.130 0.147 10/14/20 0.149 0.156 0.147 0.153 10/13/20 0.149 0.152 0.141 0.149 10/12/20 0.149 0.154 0.145 0.149 10/09/20 0.150 0.155 0.141 0.149 10/08/20 0.144 0.163 0.138 0.150 10/07/20 0.173 0.173 0.129 0.144 10/06/20 0.181 0.193 0.171 0.173 10/02/20 0.191 0.191 0.170 0.178 10/01/20 0.170 0.198 0.170 0.191 09/30/20 0.167 0.183 0.167 0.170 09/29/20 0.163 0.172 0.161 0.167 09/28/20 0.175 0.175 0.162 0.163 09/25/20 0.175 0.187 0.167 0.175 09/24/20 0.181 0.193 0.174 0.175 09/23/20 0.217 0.227 0.168 0.181 09/22120 0.236 0.243 0.217 0.217 09/21/20 0.241 0.241 0.233 0.236 QUOTES & COMPANIES Q Australia 1 Year Government Bond TMBMKAU-01Y (Tullett Prebon) VIEW ALL COMPANIES 1D 5D 1M 3M YTD 1 Y 3Y 4:30 PM AEDT 10/19/20 YIELD 1 Day Range 0.104 - 0.110 YIELD 0.106% 52 Week Range (Yield) 0.101 - 0.948 (10/07/20 - 01/02/20) 0.110% -0.004 Marina 0.105% PRICE Coupon 2.000% 102.208 -0.001 (0.00%) 0.100% Maturity 12/21/21 Oct 13 Oct 14 Oct 15 Oct 16 Oct 19 Open 0.110 Prior Close (Yield) 0.106 1 Day Price Chg TMBMKAU-01Y 0.00% Japan 10 Year -0.04% U.S. 10 Year -0.07% Germany 10 Year 0.05% DATE OPEN HIGH LOW CLOSE 10/19/20 0.110 0.110 0.104 0.106 10/16/20 0.111 0.111 0.105 0.110 10/15/20 0.108 0.116 0.105 0.111 10/14/20 0.110 0.113 0.108 0.108 10/13/20 0.109 0.113 0.107 0.110 10/12/20 0.112 0.112 0.106 0.109 10/09/20 0.114 0.116 0.109 0.112 10/08/20 0.109 0.126 0.102 0.114 10/07/20 0.122 0.122 0.101 0.109 10/06/20 0.119 0.130 0.117 0.122 10/02/20 0.126 0.126 0.115 0.121 10/01/20 0.120 0.135 0.120 0.126 09/30/20 0.121 0.128 0.119 0.120 09/29/20 0.122 0.124 0.117 0.121 09/28/20 0.116 0.144 0.116 0.122 09/25/20 0.116 0.127 0.114 0.116 09/24/20 0.140 0.140 0.116 0.116 09/23/20 0.150 0.158 0.139 0.140 09/22/20 0.160 0.163 0.149 0.150 09/21/20 0.161 0.162 0.155 0.160 Buy Sell AD1 Forex market at a glance Pair Last Open High Low Chg. - Chg.% Time + EUR/USD 1.1722 1.1721 1.1725 1.1703 +0.0004 +0.03% 18:58:05 + GBP/USD 1.2973 1.2913 1.2979 1.2897 +0.0060 +0.46% 18:58:06 USD/JPY 105.39 105.38 105.50 105.34 -0.01 -0.00% 18:58:07 USD/CHF 0.9146 0.9149 0.9166 0.9144 0.0000 +0.01% 18:58:05 + AUD/USD 0.7097 0.7077 0.7108 0.7073 +0.0017 +0.24% 18:58:03 EUR/GBP 0.9035 0.9069 0.9089 0.9023 -0.0033 -0.36% 18:58:04 USD/CAD 1.3182 1.3191 1.3195 1.3169 -0.0005 -0.04% 18:58:03 + NZD/USD 0.6625 0.6603 0.6630 0.6602 +0.0021 +0.32% 18:58:05 + EUR/JPY 123.55 123.54 123.64 123.36 +0.02 +0.02% 18:58:04 + GBP/JPY 136.74 136.17 136.86 135.93 +0.54 +0.40% 18:58:03 Performance Table Percent Change PIP Change Pair 15 Minutes Hourly Daily, 1 Week - 1 Month YTD 3 Years EUR/USD 0.05% 0.17% 0.05% -0.75% -0.95% 4.57% -0.52% GBP/USD -0.01% 0.23% 0.49% -0.67% 0.47% -2.15% -1.62% USD/JPY 0.00% -0.03% 0.00% 0.10% 0.82% -2.96% -7.14% USD/CHF -0.01% -0.20% 0.00% 0.60% 0.33% -5.52% -7.08% AUD/USD 0.03% 0.08% 0.27% -1.50% -2.61% 1.10% -9.21% EUR/GBP 0.04% -0.08% -0.37% -0.09% -1.41% 6.91% 1.10% USD/CAD 0.00% -0.04% -0.05% 0.53% -0.18% 1.48% 4.39% NZD/USD 0.01% 0.09% 0.34% -0.29% -1.97% -1.66% -4.94% EUR/JPY 0.05% 0.13% 0.04% -0.65% -0.15% 1.47% -7.62% GBP/JPY -0.00% 0.20% 0.43% -0.55% 1.30% -5.10% -8.64% Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 NZD/USD 0.66 0.67 0.68 0.69 0.70 0.70 0.72 0.72 USD/JPY 103 103 100 100 100 99 98 98 EUR/USD 1.22 1.23 1.25 1.26 1.27 1.28 1.30 1.31 GBP/USD 1.36 1.40 1.40 1.43 1.44 1.45 1.47 1.48 USD/CHF 0.91 0.91 0.91 0.91 0.91 0.92 0.91 0.91 USD/CAD 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CNY 6.70 6.60 6.55 6.50 6.45 6.40 6.35 6.30 Australian Cross Rates AUD/NZD 1.13 1.13 1.13 1.12 1.11 1.12 1.11 1.11 AUD/JPY 76 78 77 77 78 78 78 78 AUD/EUR 0.61 0.61 0.62 0.61 0.62 0.62 0.61 0.61 AUD/GBP 0.54 0.54 0.55 0.54 0.54 0.54 0.54 0.54 AUD/CHF 0.67 0.69 0.70 0.71 0.71 0.72 0.73 0.73 AUD/CAD 0.97 0.98 0.99 0.99 0.99 0.99 1.00 1.00 AUD/CNY 4.96 4.99 5.04 5.03 5.05 5.04 5.06 5.04 Effective 28 September 2020