Question
Why are forward exchange rates not forecasts of future spot rates?
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Answer
They are implied by current spot rates and interest differentials.
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Question
Which monetary policy tool is the primary day-to-day instrument in major economies?
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Answer
Open market operations.
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Question
At a high level, how does the interbank FX market differ from the client market?
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Answer
Interbank is bank-to-bank wholesale trading; client market is banks serving end users.
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Question
Why is uncovered interest parity less reliable empirically than covered interest parity?
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Answer
Expected spot rates need not adjust to eliminate arbitrage.
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