外贸实务英文版 第三部分.docx

外贸实务英文版 第三部分.docx

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外贸实务英文版第三部分

CHAPTER7

7.FOREIGNCURRENCY

7.1Exchangerisks

Ideally,acompanyoperatinginternationallyoughttobeabletopurchaseandsellinitsowncurrency:

thecurrencyofitsProfit&Lossaccount.

Howeverthisisnotalwayspossible.Ifthecountry'scurrencyisstrong,itmaybeusedforpurchasingabroad.Butsellinginitmaybeproblematical:

theimportermaybeunwillingtoaccepttheexchangerisk.Moreover,inmanyindustriesitiscustomarytoconductinternationaltradeinagivencurrency,suchasisthecasefortheoilindustryinUS$.

Insomecountries,thelocalcurrencyisnotconvertible.Thisisoftenthecaseinnon-industrialisedcountries.Convertibilityofacurrencymeansthatitcanbefreelyexchangedforothercurrenciesandthatexchangeratesareestablishedonaregularbasis.

ThemajorpartofinternationaltradeisconductedinconvertiblecurrenciesliketheUSD,EUR,CHF,JPYorGBP.Wheninanycountrytheseareinshortsupply,importsmayberestrictedthroughasystemofpermits.Onceanimporthasbeenauthorised,theCentralBankmakesavailableconvertiblecurrencyforpayment.

Butevenbetweenconvertiblecurrenciesinwhichnormaldealingtakesplace,exchangeratefluctuationsoccur.Thesecanbetheresultof:

1.adevaluationorrevaluation.

2.adepreciationorappreciation.

Devaluationandrevaluationarereferredtowhenthecentralbanksconcernedfixadifferentexchangerateagainstothercurrencies.Thissometimesoccursinconsultationwithothercentralbanksandsometimesnot.

Depreciationandappreciationaretheresultofthemarketmechanism,currencyinterventionsbythecentralbanksandthechangingofinterestratesindifferentcountries.

Thepossiblemagnitudeofexchangeratefluctuationsshouldnotbetreatedlightly.In2001，theUSDdepreciated7%againsttheEURin40days,in2002itdepreciated13%insixmonths.

Foreignexchangequotationsbythebanksareindicatedinauniformway.Thebasecurrencyissetat1whereasthepricecurrencyindicateshowmuchhereofisreceivedorhastobepaidfor1unitofthebasecurrency,fourdigitsafterthedecimalpaint.Thebasecurrencyisthatofthehomecountry.

AEUR/USD0.9013quotationmeansthatforoneEuro0.9013dollarsarereceivedorhavetobepaid.

7.2Themovementofexchangerates

Inthetimewheninternationalpaymentsconsistedlargelyofpaymentsforgoodsandservices,relativeexchangeratesmainlyresultedfromchangesinthemacro-economicindicatorsofcountriesortradingblocs:

nationalincome,inflation,balanceoftradeandpayments,economicgrowthforecasts,unemployment,warrisk,etc.

Thecurrencyfluctuationsofrecentdecadescannotbeexplainedonthebasisofthistheoryalone.Largeamountsofmoneyflowbetweentheforeignexchangemarkets.Theyareplacedinternationallywheretheycanearnthehighestyieldorincurtheleastrisk.Theyincludethefundsofbanks,currencybrokers,pensionfundsandinsurancecompanies.Itisestimatedthat1.500billionsofdollarsdailymovearoundtheworld.Onlyabout10%hereofisbasedupontransactionsofgoodsandservices.丁hecharacteristicsofsuchfloatingcapitalare:

Theforeignexchangemarketsdonothavefrontiers.Theyoperateelectronicallyon-line,24hoursaday,7daysaweek.

Theabovementionedfactorsmakethepredictionofexchangeratedevelopmentsdifficult.Aninternationallyoperatingcompanyisnotacurrencyspeculator.Forthatreason;itmakessensethatitcarefullyconsidersitsforeignexchangeexposure.

7.3Theexposuretoforeigncurrencyrisks

Mindthatevenacompanythatinvoicesinastrongcurrencyrunsacertainriskifitinvoicestocountrieswithanunstablecurrency:

theclientmaynotbeabletobuytheinvoicedstrongcurrencyifhisowncurrencydevaluatedordepreciatedstrongly.SuchwasthecaseinArgentinaintheyearsafter2000.Strictlyspeakingthisisnotacurrencyrisk,butacountryrisk.Currencyrisksareusuallyassociatedwithinvoicinginforeigncurrencies.

Inprinciple,betweenthemomentaquotationinaforeigncurrencyisfirmandthereceiptofthepayment,thereisaforeigncurrencyrisk.Theestablishmentofapricelisthasthesameeffect.

Afirmquotationmayleadtoanorderornot.Thisinducesmanycompaniestoquotewithaforeignexchangeclause:

'thisquotationisbasedonanexchangerateofEUR/USD1.0000'.Ifthisratehaschangedwhentheorderbecomesfirm,theapplicableUSDpricewillbecalculatedonthebasisoftheexchangerateprevailingatthattime.Itisalsopossibletoexcludesuchamendmentinthecaseofasmallfluctuationof1or2%.

SupposewehadofferedmerchandiseofthevaleofEUR10,flOflataEuro/Dollarrateof1，whichisUSD10,000,andwehadincludedaplusorminus2%clause.Whenthedollarstandsat0.9900atthetimeoftheorder,wehavetomaintainthepriceindollarsbecauseitfluctuatedlessthan2%However,adollarat0.9500wouldmeanthatwehavetherighttoadaptourpriceindollarstoUSD10,526,whichis10,000:

0.95.

Oncethequotationisfirmorthepricehasbeenlisted,theforeigncurrencyriskstartstorun.Itdependsupon:

1.Theperiodbetweenthequotationdateandthemomentofpayment.Thelongertheterm,thegreatertherisk.

2.Thefuturepositionoftheforeigncurrencyinwhichthetransactionwillbecarriedout,whichpositionisnotyetknown.Theweakerthecurrency,thegreatertherisk.

Whenadvancepaymenthasbeenagreed,theexposuretoforeigncurrencyriskrunsfromthequotationmomentuntilthepaymentisreceived.

Thesameapplieswhentheexchangeofthedocumentsagainstimmediatepaymenthasbeenagreed,suchasinthecaseofCAD,DIP,cashornegotiationL/C.

Itusuallyislongestwhenanyformofdeferredpaymenthasbeenagreed,suchascreditinopenaccountoranyformofacceptanceB/E.

Theextentoftheriskbornealsodependsonthesizeofthetransactionandthecalculatedprofitpercentageonit,orboth.Ifthesearesmallincomparisonwithtotalturnoverorprofit,thenitmaybepossibleforthecompanytobeartheriskitself.

Ifacompanyhasdecidedtotaketheriskitself,itcanwaituntilpaymentisreceivedintheforeigncurrency.1tcanthenbuyorsellthecurrencythroughhisbankatthespatrate.Thisisreferredtoasshottrading.Inmostpartsoftheworldtherearetwodaysbetweenthedateofpurchaseorsaleandthedateofsettlement:

currencyisboughtorsoldontheseconddayafterdealing,atthethenprevailingrate.

Iftheriskistoobig,someformofhedgingshouldbeconsidered.Thistermisusedtoindicateanyformofcoverageofforeignexchangerisks.

7.4Hedgingagainstexchangerisks

Thiscanbedoneinvariousways.Ascomparedtosmallcompanies,largecompaniesmayhavemorein-houseexpertise,abetteraccesstotheinternationalcapitalmarketandastrongernegotiatingpowerwiththebanks.However,theaccesstothehedgingmechanismsofbothisthesame.Themostcurrenthedgingtechniquesare:

Theforwardforeignexchangetransaction

Theexchangeriskcanbehedgedagainstbysellingorbuyingforeignexchangeforward.Letusassumethatanon-USexporterhassoldgoodstoavalueofU5D150,000fordeliveryafter3monthsandpayment90daysafterdelivery.Hewillthenreceivehisdollarsafter6months.Hecansellthesedollarsimmediatelyatthecurrent6-monthsdollarpurchasingrateofhisbank.Atthetimeofconcludingthedealhehastopaythebank'scommission.Insixmonthstime,hemustdeliverthedollarstothebankandreceiveslocalcurrencyattheagreedrate.

Notethathereceivesdollars.Thisusuallyisonaforeigncurrencyaccount,inthiscaseaUS$-account.Ifhewouldnothavesuchanaccount,inmostcountriesthedollarsreceivedwouldbeautomaticallyconvertedintolocalcurrencyattheprevailingspotrateandcreditedtohislocalcurrencyaccount.

Theforwardratemaybeeitherhigherorlowerthanthespotrate.Ifitishigher,thisisreferredtoasapremium.Ifitislower,thisisadiscount,andifitisequal,itissaidtobeatfar.

Forthecurrenciesinwhichmostinternationaltradeisconducted,thequestionwhetheraforwardcurrencyisatapremiumordiscountdependsmainlyupontwofactors:

Internationalinterestarbitrageensuresthatinterest-ratedifferencesarecancelledoutintheexchangerates.Thewordarbitrageisusedhereinthesenseofeliminatingpricedifferencesofmoneybetweenvariouslocations.ThearbitrageurbuysinTokyoandsellsinFrankfurtiftheformerischeaperthanthelatter,therebyensuringthatpricedifferencesdisappear.Foreignexchangearbitrageisoneofthefunctionsofinternationalbanksandcurrencybrokers.Asmentioned,largesumsofmoneyareinvolved.

Whenupwardordownwardtendenciesasaconsequenceofpoliticaloreconomicaluncertaintiesdonotplayarole,aforwardratecanbeeasilycalculated.Thespotrateofaforeigncurrencyandthedifferencesininterestratesinthetwocountriesconcernedarethentheinfluencingfactors.

Assumingthattheannualinterestratefor3-months（interbank）depositsis8%intheEuropeand4%intheUSA.IfthespotrateisEUR/USD1，thenafter3months（afourthofayear）,theEURwouldbeworth1,02andtheUSD1,01.

Dividingthetwo,the3-monthsexchangerateisfound:

Anevenfastermethodis:

theannualinterestrateintheEuropeis8%andintheUSA4%.Thedifferenceis4%perannumwhichis1%ona3-months（non-compounded}basis.Therefore,inthreemonthstimetheEUR/USDratewillbe1,01.

Notethatalowinterestrateleadstoapremiumandahighinterestrateleadstoadiscountasagainstthespotrate.

Thebanksandcurrencybrokersarethecounterpartsoftheimp