Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Jun-22 Sep-22 Exchange rate forecast Dec-20 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 0.72 103 103 100 100 100 99 98 98 USD/JPY 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 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CAD 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 0.72 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 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. Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Jun-22 Sep-22 Exchange rate forecast Dec-20 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 0.72 103 103 100 100 100 99 98 98 USD/JPY 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 1.32 1.29 1.28 1.28 1.27 1.26 1.25 1.25 USD/CAD 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 0.72 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 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
