Case: Foreign travels, Foreign-Exchange Travails I was traumatized by exchange rates long ago. It was in 1936, to be exact, when I had a course in international finance with the redoubtable Prof. Jacob Viner. I could never understand why the exchange rate on the British pound was $4.88, whereas the rate on the French...
Export »
Introduction to Foreign rates There is a fundamental difference between making payment in the domestic market and making payment for goods, services, or securities purchased abroad. In a domestic transaction only one currency is used, whereas two or more currencies may be used in a foreign transaction. For example, a U.S. company that exports...
Export »
TERMS AND DEFINITIONS An exchange rate can be defined as the number of units of one currency that must be given to acquire one unit of a currency of another country. It is the price paid in the home currency to purchase a certain quantity of funds in the currency of another country. For...
Export »
The Spot Market Since most foreign-currency transactions take place with foreign-exchange traders, the rates are quoted by the traders, who work for foreign exchange brokerage houses or commercial banks. That is one of the confusions identified in the opening case. The rates are quoted by the trader, not the buying or selling party. Whether...
Export »
The Forward Market As noted above, the spot market is for foreign exchange traded within two business days. However, some transactions may be entered into on one day but not completed until sometime in the future. For example, the French exporter of perfume might sell perfume to the U.S. importer with immediate delivery but...
Export »