Business Glossary

instruments employed in making payments between countries-paper currency, notes, checks, bills of exchange, and electronic notifications of international debits and credits.

currency-literally foreign money-used in settlement of international trade between countries. Trading in foreign exchange is the means by which values are established for commodities and manufactured goods imported or exported between countries. Creditors and borrowers settle the resulting international trade obligations, such as bank drafts, bills of exchange, bankers' acceptances, and letters of credit, by exchanging different currencies at agreed upon rates.

The result of all this international trade is that financial institutions accumulate surpluses of different currencies from loan repayments by foreign borrowers, and also from import-export trade financing on behalf of bank customers.

The interbank foreign exchange market is an over-the-counter market, a network of commercial banks, central banks, brokers, and customers who communicate with each other by telex and telephone throughout the world's major financial centers. Foreign exchange traders also make markets or speculate in different currencies, usually anticipating future appreciation of stronger currencies against weaker ones, through the foreign exchange forward market and the currency futures market.

FOREIGN EXCHANGE VALUE DATES

TODAY (Transaction Date)	TOMORROW	NEXT DAY	BEYOND TWO DAYS
Cash delivery date (U.S. dollar, Canadian dollar, Mexican peso)	Spot date for Canadian dollar tomorrow / next	Spot delivery date Tomorrow / next delivery date	Forward delivery date

See also forward exchange contract , forward forward

instruments employed in making payments between countries-paper currency, notes, checks, bills of exchange, and electronic notifications of international debits and credits.