Suppose that the Australian dollar has appreciated substantially against the Euro over the past year

Suppose that the Australian dollar has appreciated substantially against the Euro over the past year. This movement is likely to have benefitted Australian Importers, while negatively affecting German Exporters.

A. Australian Importers; German Exporters. (Correct Option)

Explanation:

When the Australian dollar appreciates in compare to the Euro, in such situation, the Australian importer will need to pay less amount of Australian dollars against the import payment in Euros. Hence the Australian importers will be benefitted and the German exporters will be in loss.

On the other hand, the Australian Exporters will be in loss because they will receive less amount in Australian dollors in compare to sales made in Euro, and the Gernam Imporers will get benefitted.

The answer to the question is OPTION D.

The justification for the same is that if the Japanese Yen Depreciates against the AUD, then the firm would be worse off in making payments in Yen. In other words if the firm has to pay in Yen then more Yen would be required for a particular payment.

Now in order to save from this depreciation the firm can presell the Yen in the forward market at the current spot rate. This means that no matter what the value of the Yen be after 60 days the firm will get the requisite currency in exchange for the Yen irrespective of the exchange rate because the firm had already entered in a forward contract where the price of exchange had been predefined.

The other alternative would be of buying a put option The reason is that put options have the quality that they increase in value when the underlying assets value decreases. Thus if the Yen depreciates then the value of the put option contract will increase. When they are exercised, put options provide a short position in the underlying asset. Because of this, they are typically used for hedging purposes or to speculate on downside price action