There Are Two Methods Used to Forecast Future Exchange Rates

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The Answer is Forecasting future exchange rates can be determined using:
1.Forward rates.This is the simplest method.The corporation can look at the forward rate of exchange between two different currencies, project that estimate into the future and convert dollar proceeds from the transaction into a preferred denomination.
2.Interest rates.Forward rates provide a direct and convenient forecast of future spot currency exchange rates, but they are not normally available beyond one year.In the case of a longer term exchange rate forecast, the international fisher effect can be used.Interest rates between two countries can be readily observable for almost any maturity whereas future inflation differentials are not.

There Are Two Methods Used to Forecast Future Exchange Rates

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