Borrowing Currencies

A. D. P. Edwards

Chapter 13 in The Exporter’s & Importer’s Handbook on Foreign Currencies, 1990, pp 65-68 from Palgrave Macmillan

Abstract: Abstract Basically there are two kinds of borrowings in foreign currency. There is a borrowing of foreign currency in order to fund the sale of goods or services and there is a borrowing of foreign currency for investment purposes. With regard to borrowing foreign currency in order to fund the sale of goods there are basically two kinds of sale. There is the ‘one-off’ sale where the product is of considerable value and the ‘on-going’ sale of small units. There are in turn two types of borrowing to suit each type of sale. There is a term loan and an overdraft. Figure 28 shows a sale to Germany concluded in June 1989 and valued at 3.0375m Deutschmarks which will be payable in twelve months time. There are two ways in which this deal can be transacted and the exporter’s risk eliminated. He can either fund the twelve months credit by borrowing sterling and sell the Deutschmarks forward at a premium, which of course is based on the difference in the Euro-currency interest rates.

Keywords: Interest Rate; Balance Sheet; Exchange Risk; Foreign Currency; Price List (search for similar items in EconPapers)
Date: 1990
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DOI: 10.1007/978-1-349-11852-6_14

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