In international transaction where payments are to be done at future date, there is always the danger of an unfavourable change of an exchange rate between the currencies the exporter and importer are dealing in. It should also be borne in mind that it is much better to follow the point of view of the bank when dealing with exchange rates. The basic Gianna Michaels principle applied by banks when dealing with foreign currency is often reffered as. The importer who wants to protect himself from an exchange risk may do it by means of a forward exchange contract which has the following features: it is made between a bank and its customer.

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