Financial Institutions, Markets, and Money, Eleventh Edition

CHAPTER TWELVE

International Markets

ENGLISH IS THE INTERNATIONAL language for airlines. If there were not a single language, imagine the difficulty pilots would have, with nearly 250 languages spoken in the world. Similarly, for U.S. citizens and businesses, it would be nice if the whole world used the U.S. dollar to conduct business transactions. Then U.S. citizens would never have to worry about the dollar value of revenues denominated in foreign currencies, the dollar value of assets they own abroad, or the dollar cost of materials they obtain from foreign sources. This would make accounting and planning much easier for all people who invest or do business internationally.

Unfortunately, people around the world are not willing to use a foreign currency to conduct their domestic transactions. Consequently, the world's citizens and businesses use many different currencies. The fact that U.S. business firms conduct business in foreign countries introduces additional risks for domestic businesses.

Hong Kong is one of the leading international business centers, best known for its unbridled, free-market, capitalist economy. It is also one of the world's most important foreign exchange markets. Foreign exchange trading is in the trillions of dollars worldwide, and transactions take place 24 hours a day, every day of the year.

CHAPTER PREVIEW

This chapter examines the major economic ...