Forex Spot and Forward Illustration 13
Analyse the following report and answer the questions given below:
The INR opened 15 paise weaker at 48.7700 per USD and continued to depreciate during the day due to heavy demand for USD. As the USD was weakening in the international market, the fall in the value of the INR in terms of cross-rates was magnified due to the vehicle currency effect. Demand was mainly due to ready import remittances and large ‘cash’ dollar transactions were reported. There was no demand for forward maturities and therefore forward margins remained stable. The 3 months Annualised Forward Margin (AFM) continued to be at 2% throughout the day.
a) What was the previous day closing rate for 1 USD in terms of INR?
b) If spot 1 USD = INR 48.8060 and 3 months AFM = 2%. Calculate 3 months forward value of 1 USD in terms of INR.
(Ans.: a) 62 i.e. 48.6200 and b) 1 USD = INR 49.0500)
3 Comments