Background
In Today's world, Business are becoming global i.e Firms are engaged in International trade and financial activities. Firms are importing and exporting. They lend and borrow funds globally.
To settle transactions they need currency of other countries for this they purchase and sale currency.
Example :- USA Firm need to purchase and sale currency of other countries to settle their International business activities.
Foreign Exchange Rate
Foreign Exchange Rate is the rate of one currency in terms of another currency.
In yester years, Rates were stable and controlled by Government Agencies. But today Rates are determined by market forces i.e demand and supply and rates keep changing.
Types of Foreign Exchange Quotes.
There are Three types of Quotes
(1) Direct Quote :- In this type of quote, One unit of foreign currency is expressed in corresponding units of home currency.
Example :- 1 Euro = $ 1.17315
Euro ( Foreign Currency ) and $ ( Home currency )
(2) Indirect Quote :- In this type of quote, One unit of home currency is expressed in corresponding units of foreign currency.
Example :- $1 = 0.8524 Euro.
Euro ( Foreign Currency ) and $ ( Home currency )
(3) International Quote ( also known as cross currency Quote ) :- In this type of quote, both the currencies are foreigne currency.
Example :- $1 = 0.8524 Euro
£ (Home currency )
$ and Euro ( Foreign Currency )
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