Unformatted text preview: erminology
• Foreign exchange (forex or FX) . . .
– To set up and then conduct business activities in another
country, and repatriate funds back to the home country,
we need to exchange our currency for another country’s
currency, and vice-versa. For example:
• If you sell goods to the USA (and get US$) you must
exchange the US$ (sell them) back into $A in order to
spend your takings in Australia !!
• If you buy goods from Japan, you will have to obtain some
Japanese Yen (buy them) using your $A in order to pay the
Japanese exporters so they can spend their takings !! etc. • This buying and selling of currencies creates a ‘foreign
exchange market’ within which prices of such currencies are
7 • Foreign exchange market . . .
– Not a single, physical location, but a network of electronic
connections between forex dealers, brokers and
• Several trillion US$ exchanged daily, mostly through
London, New York and Tokyo.
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- Fall '13
- Exchange Rate, Foreign exchange market