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Buying or selling foreign currency > Buying or selling foreign currency - Pg. 143

InTERnATIonAl TRAnSACTIonS AnD CURREnCy RISK 143 NZ dollars. Therefore, you will need to purchase the NZ dollars and probably pay for them using your local currency ­ Sterling. When approaching your bank to purchase the NZ dollars you will need a destination account. This could be the supplier's account or you might have your own NZ dollar account already set up. If you are regularly trading with NZ you may well have. The bank will offer you a rate of exchange for NZ dollars against sterling, and there will also be payment/transaction fees. You will, par- ticularly if the payment is a large one, want to obtain competitive quotes. To do this you will need to have dealing lines set up with other banks. This is so that they know who you are and can ensure they get paid. It is normal to have three dealing lines in place and obtain simul- taneous quotations. This may require several staff at the office working together and in close communication. Once you have accepted the best quote, you will provide payment instructions and the deal is concluded. Similarly, if you sell goods overseas, or for a variety of other reasons, you might need to sell a foreign currency. This is a similar procedure. Always ensure that you get a good price and obtain competitive quotes. If you expect to have to buy or sell foreign currency at a future date against your local or some other currency, then you have an exposure to the risk of exchange rates moving either in your favour or against you. We will discuss below how to hedge against such events. When buying or selling currency it is worthwhile remembering: Open dealing lines with a number of providers and read and compare the small print in their terms and conditions. When obtaining competitive quotes be sure that you compare like with like. The market changes every second, and if you are to obtain a fair comparison between quotes they will need to be obtained and compared simultaneously. Work out in advance how you are going to do this. Large companies have a treasury operation set up to do this but a smaller company may need to make some special arrangements. It is always your responsibility to ensure that the provider of the foreign currency is reputable because your government may not regulate foreign currency trading. Foreign currency trading may provide a vehicle for illegal activity such as money laundering and you need to be sure of whom you are dealing with.