imported>Doug Williamson |
imported>Doug Williamson |
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| ''Foreign exchange.'' | | 1. ''Economics - labour - trade unions''. |
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| | An arrangement under which membership of a particular trade union is necessary in order to work for a given employer, or in a given trade or profession. |
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| 1. ''Rate quotation.''
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| The base currency in a foreign exchange rate quotation is the currency which there is one of.
| | 2. ''Economics - labour - industry sectors''. |
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| | | By extension, any activity or sector which is difficult to enter. |
| <span style="color:#4B0082">'''Example 1: Foreign exchange rate quotation'''</span>
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| In the quotation GBP/USD 1.3600; or 1 GBP = 1.3600 USD,
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| the base currency is GBP;
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| meaning one British pound would be exchanged for a variable number of USD, depending on the rate quoted.
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| The base currency is also known as the Reference currency or the Fixed currency.
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| '''Base calculation rule'''
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| A rule of thumb in applying foreign exchange rates is to consider whether the calculation is from, or to, the base currency.
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| When calculating:
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| *From the base, multiply by the exchange rate
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| *To the base, divide by the exchange rate
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| <span style="color:#4B0082">'''Example 2: Calculating from the base currency'''</span>
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| We need to exchange between GBP 10m and USD.
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| Use the exchange rate GBP/USD 1.3600 to calculate the number of USD.
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| GBP is the base currency.
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| We're calculating '''''from''''' the base currency.
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| So <u>multiply</u> by the exchange rate:
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| USD amount = 10m x 1.3600
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| = '''USD 13.6m'''
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| <span style="color:#4B0082">'''Example 3: Calculating to the base currency'''</span>
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| We need to exchange between USD 10m and GBP.
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| Use the exchange rate GBP/USD 1.3600 to calculate the number of GBP.
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| GBP is the base currency.
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| We're calculating '''''to''''' the base currency.
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| So <u>divide</u> by the exchange rate:
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| GBP amount = 10m / 1.3600
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| = '''GBP 7.35m'''
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| 2. ''Currency comparison.''
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| More generally, a 'base currency' means the currency with which other currencies are compared.
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| <span style="color:#4B0082">'''Example 4: Multicurrency liquidity arrangement'''</span>
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| In a multicurrency liquidity arrangement, 'base currency' refers to the currency in which the master account is denominated and to which all other currencies are converted.
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| The base currency also serves as the basis for all interest rate calculations in the multicurrency liquidity arrangement.
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| <span style="color:#4B0082">'''Example 5: Foreign exchange gains and losses'''</span>
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| In calculating a foreign exchange gain or loss, a 'base' currency means the currency which is not considered to be 'foreign' currency for the purpose of calculating foreign exchange (FX) movements.
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| In this context, FX movements arise when an organisation enters into a transaction in a foreign currency.
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| Gains and losses are recognised, either on an [[accruals basis]] or a [[realisation]] basis, between the value of the transaction in the ‘home’ (or base) currency at two different points in time.
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| == See also == | | == See also == |
| * [[Accruals basis]] | | * [[Employee]] |
| * [[Foreign exchange]] | | * [[Employer]] |
| * [[Functional currency]] | | * [[Factors of production]] |
| * [[Indirect quote]] | | * [[Labour]] |
| * [[Realisation basis]] | | * [[Trade union]] |
| * [[Terms currency]]
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| * [[Variable currency]]
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| == Other resources ==
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| [[Media:June_16_TT_Base_jumper.pdf| Base jumper - applying base currencies, direct and indirect exchange rates, The Treasurer]]
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| [[Category:Manage_risks]] | | [[Category:Accounting,_tax_and_regulation]] |
| [[Category:Trade_finance]] | | [[Category:The_business_context]] |
