Hi guys, need sumone to please explain the HEDGE/ DON’T HEDGE DECISION in plain terms: how best to decide if the foreign currency should be hedged or not. thanx a million!
For currency appreciation, if your expectations of foreign currency appreciation are greater than as predicted by interest rate differential- do not hedge and vice versa. For currency depreciation, if your expectation for foreign currency depreciation are less than as predicted by interest rate differential, do not hedge and vice versa.