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FOREIGN EXCHANGE MARKET (Function (Currency Conversion (Currency…
FOREIGN EXCHANGE MARKET
Function
Currency Conversion
The payments a company receives for its exports,
the income it receives from foreign investments,
or the income it receives from licensing agreements with foreign firms may be in foreign currencies
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Currency speculation
involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates
Carry Trade
involves borrowing in one currency where interest rates are low, and then using the proceeds to invest in another currency where interest rates are high
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The Nature
A global network of banks, brokers, and foreign exchange dealers connected by electronic communications systems
GLOBAL CAPITAL MARKET
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risk
Due to deregulation and reduced controls on cross-border capital flows, individual nations are becoming more vulnerable to speculative capital flows
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GLOBAL BOND MARKET
Foreign Bonds
sold outside of the borrower's country and are denominated in the currency of the country in which they are issued
Eurobonds
Normally underwritten by an international syndicate of banks and placed in countries other than the one in whose currency the bond is denominated
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