By such processes the exchanges automatically reg ulate themselves between two or more places. It is obvious that under the influence of several such trans actions marginal differences would rapidly disappear. The variations in the rates df exchange in the case cited are purposely exaggerated for the sake of illus tration. In practice, a very slight difference in the rates will encourage these adjusting transactions, which are commonly known as arbitrage transac tions.
8. Exchange quotations.—The newspapers gener ally give exchange quotations in two columns. The first column (b) gives the price offered by buyers, and the other (s) gives the sellers' price; one ex pressing the demand and the other the supply. The first column gives the lowest quotations—the buyers naturally offer as low a price as possible, while the sellers try to obtain the highest price—but the real or trading quotation is generally somewhere be tween the two. There are two classes of quota tions; the posted rate, which is used principally for small amounts, and the actual or wholesale rate, used between bankers and brokers for large trans actions. As a rule, however, the rate for very large transactions is a matter of. individual negotiations owing to the frequent change in conditions during the day. Furthermore, the rates are seldom an nounced in time to be of much use except to show the general trend of exchange.
The principal exchanges quoted in the New York market are given below, with the equivalent Canadian quotations, after allowing of one per cent discount on New York funds in Montreal. The alternate quo tations for marks and francs are also shown.
The American method of quoting cents per foreign unit (fixed exchange) is so simple that the above table calls for no explanation, except in connection with the special quotations for francs and marks which is fully explained elsewhere.
9. Range of the nine frequent quotations range from about 5.10 to 5.30, advancing by % of a centime. Mark quotations range from 92 to 98 cents per 4 marks, advancing by MG of a cent. Closer quotations for either the franc or the mark are made in the form of fractional additions or deductions from the dollar value. Sterling quotations range from $4.75 to $4.95 advancing by %of) of a cent per pound or, as it is called, 5 points per pound.
The exchange rates on other countries are shown below. The quotations advance by steps of or .01
of a cent, thus 18.01, 18.02, 18.06 and so on. The last column shows the profit made on $1,000 for every advance of .01 cent, the profit on 1,000 foreign units being, of course, 10 cents for each advance of .01 cent in the quotation.' 10. Fixed and movable foreign exchange is quoted in the home currency per foreign unit, it is called fixed exchange; for instance, ex change on London is quoted in New York in dollars and cents per pound sterling. The latter is the fixed basis. The value of the pound fluctuates in dollars and cents—the higher the quotation the higher the cost of the foreign unit.
When the rate is quoted in foreign currency per home unit it is called movable exchange; for instance, exchange on Paris is quoted in New York in francs and centimes per dollar. The latter is the fixed basis. The fluctuation is expressed in the foreign currency— the higher the quotation the lower the cost of the for eign unit. • The United States and Canada quote in fixed ex change (dollars and cents per foreign unit) tho for large transactions with France and other members of the Latin Union movable exchange is used. A homely illustration may make the difference between these two methods of quoting clearer. Sugar and other commodities, like fixed exchange, are sold at so many cents per pound, or per hundred pounds, and the higher the price quoted the less sugar (or foreign money) you will receive for a dollar and therefore the dearer the exchange.
Sugar, like movable exchange, is also sold at so many pounds for the dollar (as is the case with French exchange) and the more sugar (or francs) quoted for a dollar the cheaper the exchange.
Fixed exchange: cents per foreign unit. Rule, buy low, sell high, the better the bill the higher the rate.
Movable exchange: francs per dollar. Rule, buy high, sell low, the better the bill the lower the rate.
11. countries which are fortu nate enough to have a monetary unit in common, have no conversion to make and do not require any ex change tables. Among these are the United States and Canada with the dollar in common, Great Britain and her colonies with the pound sterling, and the Latin Union with the franc. Fluctuations in ex change rates in these cases are quoted at either so much per cent discount or premium, or, as in the case of London and Australia, so many units for so many units, as £98 for £100.