Takeshi Kamada, Credit Suisse (Tokyo), observes that the ¥/$ spot rate has been holding steady, and both dollar and yen interest rates have remained relatively fixed over the past week. Takeshi wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of Takeshi's research associates - - and their computer models - - are predicting the spot rate to remain close to ¥118.00/$ for the coming 180 days. Using the same data as in the previous problem, analyze the UIA potential.
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