Which of the following statement is not correct?
A) A technique for forecasting future exchange rates that relies solely on the relationship between the prices of gold (a real asset) in the two currencies is called the asset market approach.
B) Technical analysis looks for repeating patterns in exchange rate movements in order to forecast what will happen in the future.
C) The asset market approach to exchange rate forecasting assumes that, in the short-run, exchange rate movements are probably driven by real and nominal interest rates, expectations for future growth and profitability in the economy, and investment opportunities for investment in the country.
D) The balance of payments approach to exchange rate forecasting is more useful for currencies subject to a fixed rate regime, but can still offer useful signals when a managed float is used.
E) Purchasing power parity is thought to hold reasonably well over the long run and interest rate parity is most useful to short-run predictions.

Question

Quizplus · Accepted Answer

The asset market approach to forecasting exchange rates does not rely solely on the relationship between the prices of gold in two currencies. Instead, it considers a variety of financial assets and looks at factors such as interest rates, inflation rates, and economic indicators to predict exchange rate movements.

Which of the Following Statement Is Not Correct