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International Finance- Assignment

   

Added on  2021-05-31

8 Pages1311 Words21 Views
International Finance1

IntroductionForeign exchange market is a market place where trading in foreign currencies forvarious purposes such as speculation, arbitraging, and hedging takes place. In order make gainsfrom trading in foreign currencies, it is pertinent for an investor to forecast the movements in theforeign currency in an appropriate manner. For this purpose, the investors can opt for variousmethodologies such as technical analysis, interest rate parity theory, and purpose price paritytheory1. In this context, a report has been presented here that deals with forecasting the foreigncurrency rates of USD, Euro, and GBP against AUD over a period of 12 months. Further, thereport also presents the results of trading being done in the foreign currencies to make gains withAUD 100 million.Future Exchange Rates ForecastsTechnical AnalysisUnder the technical analysis, the analyst analyzes the past movements in the rates offoreign currencies and based in this analysis, future currency rates are forecasted. A chartshowing the trend in rate per AUD to USD, Euro, and GBP is given below:1 Malkiel, B.G. 2015. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (EleventhEdition). W. W. Norton & Company.2

Figure 1: Rate per AUD over 5 years[Data source: https://in.investing.com/currencies/aud-usd-historical-data]All three currencies such as USD, Euro, and GBP have appreciated against AUD over theperiod of 5 years. In other words, it could be said that AUD has depreciated against USD, Euroand GBP over the period of 5 years. Summary of Growth rate is given in the table below:Growth rate based on past dataUSD/AUDeuro/AUDGBP/AUDYear 20130.91380.7025930.600889Year 20180.75420.6315120.556979Growth rate-6.20%-3.49%-2.50%Annualized growth rate-1.59%-0.88%-0.63%3

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