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The following are the net currency positions of a U.S. FI (stated in U.S. dollars). Note: Net currency positions are foreign exchange bought minus foreign exchange sold restated in U.S. dollar terms.
Currency
Net Position
Canadian Dollar
+U.S. $1,200
Euro
-U.S. $245,900
Japanese Yen
+U.S. $505,000
Swiss Franc
-U.S. $36,700
British Pound
+U.S. $447,900
How would you characterize the FI's risk exposure to fluctuations in the Euro to dollar exchange rate?
Group of answer choices
The FI has a balanced position in the Euro.
The FI is net short in the Euro and therefore faces the risk that the Euro will rise in value against the U.S. dollar.
The FI is net long in the Euro and therefore faces the risk that the Euro will rise in value against the U.S. dollar.
The FI is net short in the Euro and therefore faces the risk that the Euro will fall in value against the U.S. dollar.
The FI is net long in the Euro and therefore faces the risk that the Euro will fall in value against the U.S. dollar.
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