ABSTRACT
This chapter explains how exchange-rate systems operate, and how multinational companies (MNCs) can use this knowledge to mitigate the dangers fluctuating rates have on international commerce. It helps the reader to understand the nature of the foreign exchange market with a special focus on emerging markets. It is important to note that foreign exchange markets are increasingly intertwined today. As global trades have increased among trading groups, foreign exchanges have also experienced tremendous growth. The chapter also helps the reader to understand the impact of appreciation or depreciation on multinationals and what determines exchange rates. Foreign exchange transactions can take different forms. The spot transaction is an immediate transaction at a specific exchange rate. To help keep currency exchange rates stable, the Bretton Woods participants agreed to adopt a pegged exchange-rate system.
