For example, suppose that Company XYZ is based in America but also has operations in Canada. The company will be receiving Canadian dollars from sales, but will want them to be exchanged for U.S. dollars. If the U.S. dollar weakens relative to the Canadian dollar, the company will lose money.
Each month, Company XYZ forecasts the next month's Canadian sales. The company could purchase one-month currency certificates for the amount of next month's estimated Canadian sales at a foreign exchange rate specified today. This will protect the company if the Canadian dollar appreciates relative to the U.S. dollar, because it can turn in these certificates and convert the currency at the note's specified rate. If the U.S. dollar appreciates relative to the Canadian dollar, the certificates will not be used.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Certificate of Deposit Account Registry Service - CDARS — A program that allows the public to spread money around various banks. The purpose of CDARS is to help people who invest in certificate of deposits or CDs to stay below FDIC insurance limits at any given bank. Usually, to avoid exceeding FDIC… … Investment dictionary
Large denominations of United States currency — The base currency of the United States is the U.S. dollar, and is printed on bills in denominations of $1, $2, $5, $10, $20, $50, and $100. At one time, however, it also included five larger denominations. High denomination currency was prevalent … Wikipedia
List of United States Presidents by currency appearances — This is a complete list of United States Presidents by currency appearances. The President of the United States has appeared on official banknotes, coins for circulation and commemorative coins in the United States, the Confederate States of… … Wikipedia
Gold certificate — A gold certificate in general is a certificate of ownership that gold owners hold instead of storing the actual gold. It has both a historic meaning as a US paper currency (1882 1933) and a current meaning as a way to invest in gold.Perth MintThe … Wikipedia
Silver Certificate — Silver Certificates were printed for a time in the United States as a form of paper currency. They were produced in response to silver agitation by citizens who were angered by the Fourth Coinage Act, which placed the United States on the gold… … Wikipedia
Chinese currency — Han Dynasty cash coin The Renminbi (Chinese: 人民币) is the official currency of the People s Republic of China (PRC). It is the legal tender in mainland China, but not in Hong Kong and Macau. It is abb … Wikipedia
Early American currency — Front and back of a three pence bill of Pennsylvania currency, printed by John Dunlap in 1777 … Wikipedia
Obsolete denominations of United States currency — The United States has produced several coins and banknotes of its dollar which no longer circulate or have been disused. Some, like the half cent coin were removed due to inflation reducing their value while others such as the two cent and twenty … Wikipedia
Military Payment Certificate — 1 Dollar Series 692 (1970 1973) Military Payment Certificates, or MPC, was a form of currency used to pay U.S. military personnel in certain foreign countries. It was used in one area or another from a few months after the end of World War II… … Wikipedia
Foreign exchange certificate — A foreign exchange certificate, sometimes abbreviated to FEC, is a type of currency. Foreign exchange certificates are sometimes used by governments as a surrogate for a national currency, were the national currency is usually subject to exchange … Wikipedia