A high correlation between two currencies would be desirable for achieving low exchange rate risk if one is an inflow currency and the other is an outflow currency.

Question

Quizplus · Accepted Answer

A high correlation between two currencies means that they tend to move in the same direction. If one currency is an inflow currency (i.e., a currency that is being bought by a company) and the other is an outflow currency (i.e., a currency that is being sold by a company), then a high correlation between the two currencies would mean that the exchange rate between the two currencies is likely to remain relatively stable. This would reduce the risk of exchange rate fluctuations, which can have a negative impact on a company's profitability.

A High Correlation Between Two Currencies Would Be Desirable for Achieving