English problem in LV3 currency question

CFA Level III Economics
#1

In example 3 of Active Currency Mgt: Volatility trading (CB)

Q: Given her analysis for India, McYelland’s short-term market view for the INR/USD spot rate is now most likely to be:

  1. biased toward appreciation
  2. biased toward depreciation
  3. unchanged because it is only a short-run view

McYelland’s short-term view is that she expects India is expected to raise rates, but it is not fully priced in the market yet.

I understand that INR is currently undervalued but this quotation is INR/USD, and asking if appreciated or depreciated. If INR is undervalued, INR/USD is currently up, compared to the one that has fully priced considering the rate spike.

so I picked one 1) biased toward appreciation.

But the answer is 2)

please help!

1 Like
#3

My interpretation is that the base currency in INR/USD is the dollar (mentioned somewhere that the denominator is the base). So this is asking if USD gonna appr or depr.

I am not 100% sure tho. Hope an expert chimes in.

Agree with you this is poorly phrased.