13-10-2010, 08:02 PM
[attachment=5936]
Foreign exchange
Foreign Exchange Rate Determination
Determined by Demand and Supply
This also depends on the relative economic performance of the two countries
Three Types of ExchangeRate Exposure
Transaction Exposure
Economic Exposure
Translation (accounting) Exposure
Transaction Exposure
Transaction exposure arises whenever a company is committed to a foreign-currency-denominated transaction. Since the transaction will result in a future foreign currency cash inflow or outflow, any change in the exchange rate between the time the transaction is entered into and the time it is settled in cash will lead to a change in the dollar (HC) amount of the cash inflow or outflow.