Which of the following statements is true?
A)In case an FI purchases or sells foreign currencies to allow customers to partake in and complete international commercial trade transactions, the FI acts as an agent of its customers for a fee and does assume part of the FX risk.
B)In case an FI purchases or sells foreign currencies to allow customers to partake in and complete international commercial trade transactions, the FI acts as an agent of its customers for a fee but does not assume any of the FX risk.
C)In case an FI purchases or sells foreign currencies to allow customers to partake in and complete international commercial trade transactions, the FI acts as a hedger to reduce the FX exposure.
D)In case an FI purchases or sells foreign currencies to allow customers to partake in and complete international commercial trade transactions, the FI acts as an agent of its customers for a fee and as a hedger to reduce the FX exposures.

Question

Quizplus · Accepted Answer

When an FI purchases or sells foreign currencies to allow customers to engage in international trade transactions, the FI acts as an agent for its customers for a fee, but does not assume any FX risk. The FI simply facilitates the transaction, ensuring that the correct amount of foreign currency is exchanged for the right amount of domestic currency, and charges a fee for the service. The FX risk remains with the customer.

Which of the Following Statements Is True