In the US, the capital account surplus is roughly equal to the current account deficit...
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In the US, the capital account surplus is roughly equal to the current account deficit in magnitude If the Interest Rate Parity holds, then Covered Interest Arbitrage is possible. A Japanese firm sells TV sets to an American importer for one billion dollars payable in 90 days. To protect against exchange risk, the exporter (Japanese firm) could sell yen on the forward market If the dollar increases in real value, a US firm competing against a US importer firm will be worse off. China buying US T-bills would show up on the capital accounts both countries Hedging transaction risk with forwards and futures can protect against expected changes in exchange rates
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