ADM 3318 Lecture Notes - Lecture 4: Foreign Exchange Risk, Foreign Exchange Market, Speculation

• School: University of Ottawa
• Department: Administration
• Course: ADM 3318
• Professor: Ado Abdoulkadre

Document Summary

What happens in the foreign exchange markets can have a fundamental impact on the sales, profits, and strategy of an enterprise. Accordingly, it is very important for managers to understand how changes in currency exchange rates might affect their business. Foreign exchange: market for converting the currency of one country into that of another country. Exchange rate: rate at which one currency is converted into another. Foreign exchange risk: adverse consequence of unpredictable changes in the xr. International businesses use foreign exchange markets when: paying a foreign company for its g/s in its" countrys currency, possessing spare cash that they wish to invest for short terms in money markets. Currency speculation typically involves the short-term movement of funds from one currency to another in the hope of profiting from shifts in xr. The foreign exchange market has two main functions: to convert the currency of one country into the currency of another, to provide some insurance against foreign exchange risk.