By Megan Doyle
This article outlines how businesses and individuals can exchange foreign currency, from using currency kiosks and online platforms to international wire transfers and participating in the global forex market.
Whether for business or leisure, cross-border travel may be one of the most obvious reasons to exchange foreign currency. Traveler’s checks were once a necessity for international travel, but the rise of credit and debit cards may be bringing those days to an end.2 Still, credit and debit cards aren’t accepted everywhere, so travelers may wish to be prepared with enough foreign currency to get them through their journeys. Here’s how travelers can exchange domestic currency for foreign currency:
Cash on hand isn’t always necessary or practical. In these cases, international wire transfers are a common way for businesses and individuals to make cross-border payments, but there is no immediate exchange of currency like at a kiosk or ATM. Instead, the foreign currency conversion is taken care of on the back end of the transaction by the financial institution. There are two ways businesses and individuals can make a foreign currency wire transfer:
Businesses that are particularly active in the international import-export market may wish to go beyond ordinary international payments in order to hedge against currency volatility. This is where the global forex market comes in.
Business of all sizes can use the forex market to exchange and pay suppliers in foreign currency, convert customer payments from other currencies, and even obtain foreign currency for an international sales trip. To hedge against FX risk, many businesses will purchase large amounts of currency on the spot. The forex market also offers a means of using more complex FX risk management tools, such as forward contracts, futures contracts, and options. These FX tools can help businesses develop foreign currency exchange strategies tailored to their international business needs.
But it’s not just businesses that use the forex market—anyone can trade currencies, from individual people to large banks and financial institutions.12 For example, individual FX traders typically use the forex market to make money by selling currency at a higher price than they bought it for, whereas banks use it to exchange foreign currencies with one another.13
Typically, businesses and individuals who wish to trade in the forex market can use online trading platforms or seek out forex brokers and dealers.14
In order to participate in international import-export businesses, companies and individuals must know how to exchange foreign currency. Those who need to make cross-border payments may wish to explore different ways to exchange currency in order to find which method best suits their global business needs
Megan Doyle is a business technology writer and researcher based in Wantagh, NY, whose work focuses primarily on financial services technology.
1. “How to Do a Currency Exchange,” USA Today; https://traveltips.usatoday.com/currency-exchange-39876.html
2. “Traveler’s checks: Are they still used today?,” Finder; https://www.finder.com/travelers-checks-alternatives
3. “Where to Exchange Currency at the Best Rates,” Value Penguin; https://www.valuepenguin.com/where-exchange-currency-best-rates
4. “Where to Exchange Currency Without Paying Huge Fees,” NerdWallet; https://www.nerdwallet.com/blog/banking/exchange-currency-paying-huge-fees/
5. “How to Do a Currency Exchange,” USA Today; https://traveltips.usatoday.com/currency-exchange-39876.html
6. “Where to Exchange Currency Without Paying Huge Fees,” NerdWallet; https://www.nerdwallet.com/blog/banking/exchange-currency-paying-huge-fees/
7. “How to Do a Currency Exchange,” USA Today; https://traveltips.usatoday.com/currency-exchange-39876.html
9. “Where to Exchange Currency Without Paying Huge Fees,” NerdWallet; https://www.nerdwallet.com/blog/banking/exchange-currency-paying-huge-fees/
10. “6 Ways Businesses Benefit from Foreign Exchange,” BizJournals; https://www.bizjournals.com/stlouis/news/2017/12/31/6-ways-businesses-benefit-and-profit-from-foreign.html
11. “TransferWise vs International Bank Transfers,” TransferWise; https://transferwise.com/us/blog/transferwise-vs-bank-transfers
12. “Forex market,” Investopedia; https://www.investopedia.com/terms/forex/f/forex-market.asp
13. “Foreign exchange,” Investopedia; https://www.investopedia.com/terms/f/foreign-exchange.asp
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