Figure 2 plots the 3-month forward premium on the Canadian dollar and the percentage change of its spot price in terms of the U.S. dollar over the subsequent three months. Notice the tiny fluctuations of the forward premium in relation to the fluctuations in the corresponding future changes in the spot rate, a fact that is also true for most other countries' exchange rates. This suggests that the forward rate is not a very good predictor of the future spot rate. One reason might be that asset holders do not have good information about the factors affecting exchange rates.