Which of the following is not true regarding currency correlations?
A) Two highly positively correlated currencies act almost as if they are the same currency.
B) If two inflow currencies are highly positively correlated transaction exposure is somewhat offset.
C) If two inflow currencies are negatively correlated transaction exposure is somewhat offset.
D) If two currencies, one an inflow currency and the other an outflow currency, are highly positively correlated, transaction exposure is somewhat offset.

Question

Quizplus · Accepted Answer

If two inflow currencies are highly positively correlated, transaction exposure is not offset; instead, it is reinforced because both currencies would move in the same direction, increasing exposure.

Which of the Following Is Not True Regarding Currency Correlations