Financial Markets and Institutions (2-downloads)

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Part 5 Financial Markets

T H E   P R A C T I C I N G   M A N A G E R

Profiting from Foreign 

Exchange Forecasts

Managers of financial institutions care a great deal about what foreign exchange rates

will be in the future because these rates affect the value of assets on their balance sheet

that are denominated in foreign currencies. In addition, financial institutions often

engage in trading foreign exchange, both for their own account and for their customers.

Forecasts of future foreign exchange rates can thus have a big impact on the profits

that financial institutions make on their foreign exchange trading operations.

Managers of financial institutions obtain foreign exchange forecasts either by hir-

ing their own staff economists to generate them or by purchasing forecasts from other