Sunday, September 6, 2009

Buying and selling foreign exchange by international banks

Major multinational banks, as we saw in the preceding topics, have dealer departments which specialize in trading foreign currencies. The largest multinational hold inventories of selected currencies for themselves and for the convenience of their customers, they may also negotiate forward contracts for the future delivery of foreign exchange and speculate on future currency price movements in hopes of turning a profit. Smaller banks usually hold very small currency inventories and concentrate mainly on buying and selling foreign exchange for their customers rather than for speculative purposes. They frequently purchase whatever currency is needed for immediate or future delivery to a customer from larger international banks that maintain active currency position.

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