Dennis writes that in export sales transactions, buyers and sellers rarely use the same currency, and the relative value of their respective currencies constantly changes. Depending on whether the sale is to be paid in the buyer's currency or the seller's currency, one party or the other incur additional risks and lost profits when foreign exchange rates are unfavorable to that party to the transaction. This is the result of changes in the relative value of two currencies between the time the goods are sold and the time they are paid for. Dennis writes that foreign exchange rate fluctuation is one of the risks of selling internationally. Currency exchange rates are influenced by a variety of factors including supply and demand; interest rate differentials; economic news; political events; and government intervention and there is no single entity that regulates or controls the foreign exchange market. There are a variety of ways to hedge against unfavorable changes in the value of foreign currency exchange rates, including these:Wikipedia, (2005). Retrieved Jan. 09, 2005, from History of the European Union Web site: http://en.wikipedia.org/wiki /History_of_the_European_Union. According to the OANDA.com (online), the buyers and sellers in the foreign exchange market include banks, corporations, governments, and individuals. Currency exchange rates are expressed in terms of bid and ask. The Bid is the price at which buyers offer to buy currencies from sellers. The Ask price is the price at which sellers offer currencies to buyers. As of January 9, 2005, one (1) U.S. Dollar equals 0.76593 Euro with a median bid price of 0.76564 and a median ask price of 0.76593. The exchange rate on December 31, 2004 was one (1) U.S. Dollar equals 0.73314 Euro. On June 30, 2004, the exchange rate was one (1) U.S. Dollar equals 0.82768 Euro. On December 31, 2003, the exchange rate was one (1) |
