Let us consider a case where a Japanese company exports electronic goods to USA and invoices the goods in US Dollars. The American importer will pay the amount in US dollars, as the same is his home currency. However the Japanese exporter requires Yen means his home currency for procuring raw materials and for payment to the labour charges etc. Thus he would need exchanging US dollars for Yen. If the Japanese exporters invoice his goods in Yen, then importer in USA will get his dollars converted in Yen and pay the exporter.
From the above example we can infer that in case goods are bought or sold outside the country, exchange of currency is necessary.
Sometimes it also happens that the transactions between two countries will be settled in the currency of the third country. In that case both the countries, which are transacting will require converting their respective currencies in the currency of the third country. For that also the foreign exchange is required.
From the above example we can infer that in case goods are bought or sold outside the country, exchange of currency is necessary.
Sometimes it also happens that the transactions between two countries will be settled in the currency of the third country. In that case both the countries, which are transacting will require converting their respective currencies in the currency of the third country. For that also the foreign exchange is required.