WHEN DO FIRMS USE THE
FOREIGN EXCHANGE MARKET?
International companies use the foreign exchange market when
the payments they receive for exports, the income they receive from foreign
investments, or the income they receive from licensing agreements with foreign firms
are in foreign currencies
they must pay a foreign company for its products or services in its country’s
currency
they have spare cash that they wish to invest for short terms in money markets
they are involved in currency speculation - the short-term movement of funds from
one currency to another in the hopes of profiting from shifts in exchange rates