If the spot rate for Swiss Francs versus US Dollars is one SF equals 1.15 US $, and the annual interest rate on fixed rate one-year deposits of SF is 0.25% and for US$ is 1.5%, what is the nine-month forward rate for one dollar in terms of SF? Assuming the same interest rates, what is the 18-month forward rate for one SF in US$? Is this a direct or an indirect rate? If the forward rate is an accurate predictor of exchange rates, in this case will the SF get stronger or weaker against the US dollar? What does this indicate about the market’s inflation expectations in Switzerland compared to the US?
This question was answered on: May 23, 2022
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