Foreign Exchange Markets Are One Research Paper

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In fact, modernly, most banks no longer attempt intervention in the marketplace at all. It can be argued, however that there is some value to remaining aware of currency exchanges. For example, determining some for of hedging for long-term purchase contracts can help businesses avoid season-related losses (Mizen, 2003). On the same note, however, it is just as simple for a business to require payment of the agreed upon amount on the actual day of exchange, not in advance. This allows complete avoidance of any market shifts as that current day's market price will set the total. At this point, it becomes apparent that the only reason for intervening or exchanging funds early would be to make a profit in excess of the agreed upon purchase price.

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While useful and a creative technique, the market is unpredictable and such measures can prove very risky.

As can be seen there is justification in being aware of the market and acting prudently as a business person. However, attempting to manipulate or otherwise benefit from the changing foreign market prices can result in losses instead of gains for a company, whereas simply purchasing and letting the market ebb and flow as it naturally keeps a positive shareholder outlook and ensures minimal gains or losses, simply the contractually agreed upon price.

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