CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

Which of the following will exert upward pressure on a high yield currency's value?

A. a sustained narrowing nominal yield spread.
B. a sustained narrowing relative inflation expectations.
C. an increasing risk premium to hold the high-yield currency's assets.
Correct Answer: B

User Contributed Comments 2

User Comment
bablig why not a? can anybody explain
rlabog the real FX rate (q) = average q + nominal yield spread - inflation spread - risk premium spread

if the spread is narrow, the value is small. If you want to exert upward pressure on q, you should have a large average q, large nominal yield spread, small inflation spread, small risk premium spread
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