ABSTRACT
International trade creates a need for buying, selling or borrowing foreign currencies. When, for example, an exporter in Japan sells goods to a customer in the US, the sale will be priced in yen, dollars, or perhaps a third currency such as sterling.
If the sale is priced in yen, the customer will purchase yen with dollars in order to make the payment.
If the sale price is in dollars, the Japanese supplier normally will wish to convert the receipts into his domestic currency, yen, and will sell dollars in exchange for yen.
If the sale price is in a third currency, such as sterling, the customer will buy sterling in exchange for dollars to make the payment and the supplier will then sell the sterling in exchange for yen.
