If a Canadian exporter accepts payments in foreign currency from buyers in the U
ID: 350041 • Letter: I
Question
If a Canadian exporter accepts payments in foreign currency from buyers in the United States, which party bears the currency fluctuation risk? Explain.
The euro has now replaced 17 national currencies. What are the implications of this development to companies exporting to the European Union?
The manager of the letter of credit division of Citibank in Chicago learns that the ship on which a local exporter shipped goods to Yokohama, Japan, was destroyed by fire. He knows that the buyer in Yokohama will never receive the goods. The manager, however, received all the documents required under the letter of credit. Should the manager pay the exporter or withhold payment and notify the overseas customer in Japan?
Differentiate the role and responsibility of banks in documentary collections and in letters of credit.
state the major factors accounting for the resurgence of countertrade?
Explanation / Answer
Answer
The Canadian exporter is the one who is exposed to the risk of the fluctuating currency because in this case, the exporter has agreed to accept payment in USD, so no matter what as per the terms of the payment the importer would pay to the Canadian exporter a fixed number of dollars for the goods provided. Now, if the Canadian dollar depreciates with respect to the dollar the exporter would get more Canadian Dollars, however, if the Canadian Dollar appreciates as compared to the USD then the exporter would lose money.