--%>
Assignment Help - homework help

Foreign exchange transactions

Discuss how foreign exchange transactions between the international banks are settled?

E

Expert

Verified

Interbank market is the system of correspondent banking relationships, with large commercial banks sustaining the demand deposit accounts with each other, known as correspondent bank accounts.  Correspondent bank account system permits for the efficient functioning of foreign exchange market.  Considering the example of how system of the correspondent bank accounts services the international foreign exchange transactions, consider the U.S. importer who is willing in order to buy the merchandise invoiced within the guilders from a Dutch exporter.  U.S. importer may contact his bank and query about exchange rate. If U.S. importer accepts offered exchange rate, bank may debit the U.S. importer’s account for buying Dutch guilders. Bank may instruct its correspondent bank in Netherlands to debit its correspondent bank account with the appropriate amount of guilders and to credit Dutch exporter’s bank account.  Importer’s bank may then debit its books to offset debit of the U.S. importer’s account, reflecting the decline in its correspondent bank account balance.

   Related Questions in Financial Accounting

  • Q : Why depreciation is not charged on land

    Explain why depreciation is not charged on land?

    		•
  • Q : Styles of love Identify and explain the

    Identify and explain the styles of love. Describe each of these styles and give an example of each.

    		•
  • Q : Rule of nominal account Why the rule of

    Why the rule of nominal account is just opposite with the rule of personal account and real account?

    		•
  • Q : Swap broker and swap dealer State the

    State the difference between the swap broker and the swap dealer.

    		•
  • Q : Determining interest rate parity

    Presently, spot exchange rate is $1.50/£ and three-month forward exchange rate is $1.52/£. Three-month interest rate is 8.0% per annum within the U.S. and 5.8% per annum within the U.K. Suppose that you can borrow as much as $1,500,000 or £1,000,000.

    		•
  • Q : Re-measurement and translation

    Explain the re-measurement and translation procedure in FASB 52 of translating to the reporting currency the books of the entirely owned affiliate which maintains its books in local currency of country in which it operates, that is different from its functional curren

    		•
  • Q : Human race in our modern world Here are

    Here are two papers addressed to the in-class essay from the previous class. Study them in the context of the exact wording of the assignment and take some notes that will enable you to refer to specific features of the two papers when talking about their relative qua

    		•
  • Q : What is Assets in Accounting Assets are

    Assets are those resources that the business owns. Assets are the things of value owned which enable the firm to get cash or befit in future. There are mainly two types of assets: - Current assets & Fixed assets for e.g. cash, f

    		•
  • Q : Case study of harvesting a tree

    Recently, a friend accused her neighbor of harvesting a tree (sapling of balsam fir, Abies balsamea) from her land without permission. Her neighbor claims that he bought it from a Christmas tree plantation (growing in a clearing down the road).  Your friend says

    		•
  • Q : What is the opening accounts receivable

    Big Problem Ltd., an oil refining business uses an allowance system to account for bad debts. At the beginning of the year the allowance had a credit balance of $16,000. The following transactions took place during the year. a) Tot

    		•