CFA Question Bank - Economics - Question 9 - Why is USD foreign price?

Hi all, the question asks to calculate the USD/NZD spot price one year from now.

Bid ask USD/NZD= 0.6740 / 0.6770

1y Libor USD / NZD= 0.80% / 2%

The solution suggests to use the uncovered interest parity model:


in the solution they also say that USD is the foreign currency, therefore the solution is mid-price USD/NZD 0.6755 x (1.008/1.02) = 0.6766

Has anyone solved this question? Why is USD the foreign ccy?

The foreign currency is the numerator. Regardless, I don’t t even concern myself with which is which .! All u do is match up the numerator within the numerator for the interest and plug and play.

The author of the question is a Kiwi.

Nailed it!