Foreign exchange quotations in London are pub lished in two forms: (a) "Foreign Exchanges" or "Rates of Ex change." These rates are published daily in the London papers and give the quotations for checks and bills on London obtaining at the various foreign centers, these rates being cabled daily or oftener if changes are frequent.
(b) " Course of Exchange" or in "street" parlance "On Change Table." The quotations are pub lished every Wednesday and Friday and represent the rates which English brokers pay for drafts drawn on the various foreign centers. In other words, "Foreign Exchanges" give the rates that for eign exchange brokers are paying for drafts drawn on foreign centers.
7. Rates of Exchange.—The following taken from the London Times of 17th July, 1914, is a speci men of the "Rates of Exchange." It generally ap pears with two other columns giving the quotations for the two previous days. These are replaced here by explanatory remarks: Arranged as above the table calls for little comment.
The reader should constantly bear in mind that these rates are quoted in foreign markets for bills drawn on London and that in the case of "movable exchange," i. e. foreign money per pound sterling, high rates are favorable to Great Britain, as more foreign money is received for a sovereign while low rates are unfavorable. Movable exchange in London is of course fixed exchange in the other country, and vice versa.
In the case of "fixed exchange," i. e., pence for foreign money, the position is reversed as the higher rate gives more pence per foreign unit or, in other words, less foreign money is received for a sovereign. Fixed exchange in London is movable exchange in the foreign country. The quotation $4.86 per pound is movable exchange in London and fixed exchange in New York.
In many instances it will be noted that two rates are quoted. The lower rate is the buyers' price and the higher rate the sellers' price. The real or trad ing price is generally between the two. The extent of the margin between the two quotations depends upon the volume of the transactions and whether or not the buyers or sellers are in the majority.
The "Foreign Exchange Table" is the more im portant, as far more bills are drawn on London than London draws upon other countries. These quota tions serve as a barometer of international exchange and are very closely watched by financial men.
In studying any foreign exchange quotations it is well to bear in mind the following simple rules: Movable Exchange. Foreign money per home unit. Buy high, sell low, the better the bill the lower the rate, the longer the currency the higher the rate.
Fixed Exchange. Home money per foreign unit. Buy low, sell high, the better the bill the higher the rate, the longer the currency the lower the rate.
8. Course of Exchange.—Every Tuesday and Thursday, bankers and foreign exchange dealers meet at the Royal Exchange in London to buy and sell bills drawn on foreign centers and on the follow ing day the papers publish the prices at which bills have changed hands.
The following table is taken from the London Times of July 17, 1914, and as in the case of the Rates of Exchange previous quotations have been replaced by explanatory notes.
It will be noted that these rates are closely in sym pathy with those given in the above Foreign Ex change Table and represent the price that London was willing to pay for bills on these centers.
With one or two minor exceptions the quotations conform to those in the summary of Foreign Ex changes. This table, however, is dated before the Eu ropean war which commenced in August, 1914. Since then the discrepancies have apparently disap peared and the quotations in the two tables are now practically uniform. New York and Spain are now quoted in foreign units per pound sterling instead of pence per foreign unit. Russia is quoted in roubles per £10, and Holland in florins and cents instead of florins and stivers.
Where two rates are quoted for long bills in the Course of Exchange the better price is for bank ers' bills and the lower price for ordinary commercial bills.
The short or check rate refers not only to checks and demand items but also to bills payable at eight days or less. When two rates are quoted for checks, the better rate is for demand items and the lower rate for short date bills. Movable exchange rate for long paper is quoted higher than short exchange; in other words, more foreign money will be received for a sovereign if payment in the foreign country is deferred thirty or sixty days, whereas, the reverse is true of fixed exchange quotations, the longer the payment is deferred the less the foreign unit costs.