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

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

Quizplus · Accepted Answer

If speculators expect the spot rate of the Canadian dollar to be lower than the 30-day forward rate, they would sell Canadian dollars forward, anticipating a decline in value. This action increases the supply of forward contracts, putting downward pressure on the forward rate.

If Speculators Expect the Spot Rate of the Canadian Dollar