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A Cd/$ Bank Trader Is Currently Quoting A Small Figure Bid-ask Of 35-40, When The Rest Of The Market Is Trading At Cd1.3436-cd1.3441. What Is Implied About The Trader’s Beliefs By His Prices? |
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Answer» The trader must think the Canadian dollar is going to appreciate against the U.S. dollar and therefore he is trying to increase his inventory of Canadian dollars by discouraging PURCHASES of U.S. dollars by standing WILLING to buy $ at only CD1.3435/$1.00 and offering to sell from inventory at the SLIGHTLY lower than MARKET price of CD1.3440/$1.00. The trader must think the Canadian dollar is going to appreciate against the U.S. dollar and therefore he is trying to increase his inventory of Canadian dollars by discouraging purchases of U.S. dollars by standing willing to buy $ at only CD1.3435/$1.00 and offering to sell from inventory at the slightly lower than market price of CD1.3440/$1.00. |
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