Schweser mistake? currency

anothercfainnyc

Refer to P235 in book 5. The free market theory states that a rise in real interest rates would lead to currency appreciation(caused by financial inflows) and lower bond prices. So a U.S bond investor in Japan would make a 10% return on from holding yen if the yen appreciates by 10%. We know that the bond price will drop. However the drop in the bond price could be GREATER OR LESS than 10%. If its less than 10%, the overall effect for the U.S investor is positive. Therefore the domestic currency exposure won't neccessarily be negative. But, the local currency exposure will be negative. So the writing in blue in figure 4 is wrong. Check P506 of V5 in your curriculum, under the section entitled 'currency exposure for bonds'. The term "negative domestic exposure" isnt even mentioned. The term 'local currency exposure' is.