Importance or new to you

Tell us how you can apply the information working in your speciality. Discuss it with a partner.

Quickly skim the text to find three functions that international liquidity performs.

Tell your group which information you think should be added to the main text on the given

Issue. Discuss it.

Basic Text. Currency Liquidity

A basic feature which distinguishes international and domestic payments is that the two different

National currencies are involved. Thus, for instance, when American firms export goods to British firms,

The American exporter will want to be paid in dollars. But the British importers have pounds. The

Problem, then, is to exchange pounds for dollars to permit the American export transaction to occur.

The same refers to any other national or regional currency, e.g. the Euro for yen or roubles for

Dollars, etc.

This problem is resolved by the existence of foreign exchange markets in which dollars can be

Used to purchase British pounds, Japanese yen, European Euro and so forth, and vice versa. Sponsored

By major banks in New York, London, Zurich, and elsewhere, foreign exchange markets

Facilitate international exports and imports.

Let us see what the exchange market is and how it functions.

Foreign-exchange market. The market in which transactions are conducted to effect the transfer