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Foreign Exchange
Foreign Exchange refers to the relationship between world currencies and how they compare to one another. The value of a country's currency is determined by many variables with some of the key components being their economic strength and political stability. RBC Royal Bank's foreign exchange services can help you minimize the risks involved in international business.
How can this help my business?
- If your company buys or sells outside of Canada, you are already participating in the foreign exchange market regardless of the currency (ies) of your payables or receivables. RBC Royal Bank foreign exchange services can help business owners and managers understand the factors affecting the value of the Canadian dollar verses other world currencies, and how to manage the risk involved in currency fluctuations.
What else do I need to know?
- There can be benefits to both a weak Canadian dollar, as well as, a strong Canadian dollar
- The value of the Canadian dollar is not always determined in Canada, or North America
- The immediate exchange of one currency for another is called a Spot Transaction
- A Foreign Exchange Forward Contract is an agreement that commits two parties to exchange two currencies at a specific rate and date (or period) in the future
- A Swap Transaction is an agreement to exchange an amount of one currency for another at a specific point in time and then re-exchange the same currencies at an agreed date in the future at the same rate
- A Foreign Exchange Option gives the buyer of the option the right but not the obligation to buy or sell a specific amount of one currency against another at a future date or range of dates at an agreed rate.
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