If speculators expect the spot rate of the Canadian dollar in 30 days to be ____ than the 30-day forward rate on Canadian dollars, they will ____ Canadian dollars forward and put ____ pressure on the Canadian dollar forward rate.
A) lower; sell; upward
B) lower; sell; downward
C) higher; sell; upward
D) higher; sell; downward

Question

Quizplus · Accepted Answer

If speculators expect the future spot rate to be lower than the current forward rate, they will sell Canadian dollars forward, anticipating a profit, which puts downward pressure on the forward rate.

If Speculators Expect the Spot Rate of the Canadian Dollar