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Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Mar 21...

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Table 1: Foreign currency Forecasts: Source NAB September 28, 2020 Exchange rate forecast Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 0.14 0.70 OTT D.BD AUD/USD NED/USD USDUPY TO 0.79 9 0.72 191 100 100 9 101 122 1.23 1.25 127 1.28 1.30 131 1.40 140 145 141 1.48 091 0.91 0.31 0.91 0:52 0.91 091 1.2 LT 126 1.25 1.25 EUR USD GBPUSD USDICHE USD CAD USD CNY Australian Cross Rates MUDINZO AUDUPY G.TO 6.55 5.50 6.45 6:40 6.35 3D 1.13 1.13 113 112 111 112 1.11 111 76 78 77 77 78 78 0.61 0.61 0.61 0.62 0.62 Dul 061 AUD/EUR AUD GBP 0.55 0.54 0.54 0.54 0.67 0.69 Q.TO 0.71 0.71 0.72 0.73 0.73 AUDCHF AUD CAD AUDINY 1.00 5.04 5.03 5.05 504 5.06 5.04 Effective 28 September 2020 a) In generating their forex forecasts, NAB economists would have made a number of assumptions. These may or may not hold. For instance, take the AUD/USD forecast. Outline factors or events that may render the forecasts inaccurate. (10 marks) b) In question 2, we looked at exposures of an Australian company in major currencies such as USD and JPY. If the firm had exposures in currencies such as Brazilian Real or Indonesian Rupiah, what options does the firm have in terms of hedging/foreign exchange risk management? (10 marks)

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