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Discuss why, from a technical analysis framework, currency movements tend to overshoot.
Step by step
Solved in 2 steps
- Explain in general terms how various forms of arbitrage can remove any discrepancies in the pricing of currencies. Explain the concept of locational arbitrage and the scenario necessary for it to be plausible.What is the purpose and workings of the Monetary policy transmission mechanism (MPTM)?What are the causes of time lag in MTPM, please discuss including some critical evaluation.What is currency risk with practical example ?
- Does Arbitrage destabilize foreign exchange markets? Support your logic about that statementDiscuss if technical analysis and fundamental analysis provide complementary or conflicting market signals. Discuss if there are discernable patterns in the currency pair movements.Explain the random walk model for exchange rate forecasting. Can it be consistent with technical analysis?
- The focus of the short-run macro model is on the role of a. spending in explaining economic fluctuations b. output in explaining economic fluctuations c. labor in explaining economic fluctuations d. financial markets in explaining economic fluctuationsAnswer the following: a. Explain why the interest parity condition must hold if the foreign exchange market is in equilibrium. b. Explain why overshooting occurs. What can the Central Bank do to mitigate its effects?why a organisation should consider hedging net payables or net receivables with currency options rather than: forward contracts, and future contracts.