When expecting a foreign currency to depreciate, a possible way to speculate on this movement is to borrow dollars, convert the proceeds to the foreign currency, lend in the foreign country, and use the proceeds from this investment to repay the dollar loan.

Question

Quizplus · Accepted Answer

This strategy would not be effective if you expect the foreign currency to depreciate, as the value of the foreign currency would decrease relative to the dollar, potentially resulting in a loss when converting back to dollars to repay the loan.

When Expecting a Foreign Currency to Depreciate, a Possible Way