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International Bond and Currency Markets
Finance & Accounting
Pages 8 (2008 words)
International Bond and Currency Markets Table of Contents Introduction 3 Challenges in Forecasting Exchange Rate in Short Run 4 Challenges in Forecasting Exchange Rate in Long Run 6 Conclusion 8 References 10 Introduction Effective and accurate forecasting of the exchange rate fluctuations is an important and fundamental problem in international financial decisions.
In precise, it also helps in pre-determining the fluctuation of the currency appreciation or depreciation in respect to countries and influenced cross border trade prospects by a substantial extent. It is noteworthy that the volatility of exchange rate, in the short run and also in the long run depends on multiple factors such as the demand and supply prospects in the financial market. Arguably, forecasting in the long run and short run is considered as quite difficult, which can be explained with reference to the Theory of Speculation in the market and the collective belief of the investors about the future prospects (Andreou & Zombanakis, 2006). Based on these underpinnings about the importance of forecasting exchange rate fluctuations, this essay will aim at emphasising the challenges commonly witnessed by analysts when obtaining the intended forecasting results in the short run as well as in the long run performance of the exchange rate. Challenges in Forecasting Exchange Rate in Short Run Arguably, in the short run, the forecasting of exchange rate is nearly impossible. ...
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