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Considering current world economic climate, the future exchange rates are uncertain. How would you analyse/anticipate the change in exchange rates? Write a brief proposal to mitigate impact of possible exchange rate fluctuations

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Answer:

In order to analyse and anticipate the change in exchange rates, I would use a combination of technical and fundamental analysis. Technical analysis involves studying charts and trends to identify patterns that can be used to predict future price movements. Fundamental analysis involves looking at economic indicators such as GDP growth, inflation, unemployment, and interest rates to gain an understanding of the underlying economic conditions that can affect exchange rates.

In order to mitigate the impact of possible exchange rate fluctuations, I would suggest implementing a strategy of hedging. Hedging involves taking out a position in a currency or financial instrument that is opposite to the current position in order to reduce the risk of losses due to exchange rate fluctuations. This can be done through the use of forward contracts, options, and futures. Additionally, I would suggest diversifying investments across multiple currencies to reduce the risk of losses due to exchange rate fluctuations.

Finally, I would suggest monitoring exchange rate movements closely and adjusting the hedging strategy accordingly in order to ensure that the hedging strategy is effective in mitigating the impact of exchange rate fluctuations.

Step-by-step explanation:

User Lorenzo Baracchi
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