It is typical during the currency defense to see the forward currency price decline ahead of the spot price. This is a consequence of the relationship between the interest rate differential and the spot/forward currency pricing that I discussed above. To the extent that the country tightens monetary policy to try to support the currency, they are just increasing the interest rate differential to artificially hold up the spot currency. While this supports the spot, the forward will continue to decline relative to it. As a result, what you see is essentially a whip-like effect, where the forward
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