Question

Does it mean the same that the dollar would be selling at discount against euro and that euro would be buying at premium against the dollar regarding to forward premium/discount?

Answer 1

No, this statement is false because there would be a certain difference because of denominator and numerator effect as the rate of Decline in Dollars would not be similar to the rate of increase in euro.

It can be example through the following illustration-

Let's say 1 Euro= 1.5 dollars

After 2 months, 1 Euro= 1.75 dollars

So rate of change in euro= (1.75-1.50)/1.50= 16.67%

Rate of change in Dollars= (1/1.5)-(1/1.75)/1/1.5

=(.66666-.57142)/.66666

= 14.28%

so ,we can see in this example that the rate of change in euro is higher than the rate of change in the dollar due to Dollar depreciation.