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Lect09-International Financial Markets-VineyChptr15

to set up and then conduct business activities in

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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 $A in order to pay the Japanese exporters so they can spend their takings !! etc. • This buying and selling of currencies creates a ‘foreign exchange market’ within which prices of such currencies are determined. 7 • Foreign exchange market . . . – Not a single, physical location, but a network of electronic Not connections between forex dealers, brokers and customers worldwide. worldwide • Several trillion US$ exchanged daily, mostly through Several London, New York and Tokyo. London,...
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