Windjammer

mp2438 Wrote:
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> I'm with hdave here, what am I missing?
>
>
> I thought I should only hedge if I think I can
> beat the market, so in this case, if I expect to
> only make 0.4% while IRP says I will make 0.7%,
> then shouldn't I just stay put and go with the
> flow?

If you expect the U.S. dollar to appreciate by 0.4%, and IRP says the U.S. dollar should appreciate by 0.7%, then you should HEDGE to lock in 0.7%. You hedge by entering into a forward contract that will be priced based on the interest rate differential of 0.7%.