Assume a Japanese firm invoices exports to the UK in pounds. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the pound to ____ against the yen, it would likely wish to hedge. It could hedge by ____ pounds forward.

Question

Quizplus · Accepted Answer

If the Japanese firm expects the pound to depreciate against the yen, it would hedge against this risk by selling pounds forward to lock in the current exchange rate and avoid potential losses from the pound's depreciation.

Assume a Japanese Firm Invoices Exports to the UK in Pounds