LS CHAPTER 5.docx - LS CHAPTER 5 When a currency is trading...

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LS CHAPTER 5 When a currency is trading at a premium to the dollar in American terms in the forward market, the dollar is usually expected to Depreciate in value. A bank’s uncovered speculative position in a currency is referred to as a(n) ( outright ) forward transaction. The currencies that are by convention priced in terms of the U.S. dollar are said to be in American terms (a direct quote from the U.S. perspective). The simultaneous sale of spot foreign exchange against a forward purchase of approximately an equal amount of the foreign currency is a forward swap transaction. The almost immediate (two-day) purchase or sale of foreign exchange occurs on the spot market. A shorthand method for expressing forward quotes from spot rate quotations is the use of forward points . A cross -exchange rate is an exchange rate between a currency pair where neither currency is the U.S. dollar. Contracting today for the future purchase or sale of foreign exchange occurs in the forward market. From the U.S. perspective, a(n) direct quotation is the price of one unit of the foreign currency in U.S. dollars. From the U.S. perspective, a(n) indirect is the price of one U.S. dollar in the foreign currency. When a currency is trading at a discount to the dollar in European terms in the forward market, the dollar is usually expected to depreciate . Currency ETFs can be used by investors for optimal portfolio construction since currency is now recognized as a distinct asset class, like stocks and bonds. The process of using foreign currency reserves to buy one’s own currency in order to decrease its supply and thus increase its value in the foreign exchange market, or alternatively, selling one’s own currency for foreign currency in order to increase its supply and lower its price is referred to as ______.
Most currencies in the interbank market are quoted in ____ terms, that is, the U.S. dollar is priced in terms of the foreign currency (an indirect quote from the U.S. perspective).
The term FN(J/K) refers to the price of _____.
The structure of the foreign exchange market is an outgrowth of one of the primary functions of a(n)_____ banker; to assist clients in the conduct of international commerce
A security that trades on a stock exchange and allows small investors to invest in a currency or a portfolios of assets is known by the initials ______.

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