He said in the short term, the exchange rate movement could react to new headlines and market sentiments, instead of reflecting the underlying strength of the economy.
He said in short term, the exchange rate movement could react to new headlines and market sentiments, instead of reflecting the underlying strength of the economy.
Currency hedging, often utilised by exporters and fund managers in particular, is a tool used to manage the risks from currency exchange rate movements.
This model can account for real exchange rate volatility, but does not say anything about the volatility of relative to output or the persistence of the real exchange rate movements.
This is the consequence of frequent free floating countries' reaction to exchange rate movements with monetary policy and/or intervention in the foreign exchange market.
When an accrued item is settled, the difference due to exchange rate movement in the amount accrued and the amount settled is treated as foreign exchange gain or loss.