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Flashcards in Foreign Exchange Movement Deck (6):

Technical forecasting of foreign exchange rates

Just like technical analysis in EMH - uses statistics, historical data, charts, and graphs tracking behavior of the foreign exchange rates to predict their future movements - will it depreciate? Will it appreciate?


Fundamental forecasting of foreign exchange rates

Just like fundamental analysis in EMH - uses relationships between foreign exchange rates and economic variables to forecast movement of foreign exchange rates


Spot Rate Market vs. Forward Rate Market

Spot Rate = the exchange rate on the market right now on the spot

Forward Rate = the rate that the market thinks it will be in 90 days, 120 days, XXX days. --> it is the forecasted FUTURE spot rate. ************be sure to annualize the forward rate if the exam questions asks for annual amount


Economic Exposure

Risk of exchange rate fluctuations affecting a firm's FUTURE cash flow


Translation Exposure



Transactions Risk

WTF is this?