A speculator who expects a foreign currency to appreciate could purchase the currency forward and, when received, sell it in the spot market.

Question

Quizplus · Accepted Answer

By purchasing the foreign currency forward, the speculator is locking in the exchange rate at a future date when the currency is expected to appreciate. When the currency is received in the future, the speculator can sell it in the spot market at a higher exchange rate, realizing a profit.

A Speculator Who Expects a Foreign Currency to Appreciate Could