Dollarization#Euro

As foreign currency refers to a currency when it is used outside the control of the central bank issuing them to payment and store of value purposes. Continued use of a currency outside their actual currency area is mainly due to the non-performance of the functions of money by the respective national currency. Therefore, some countries, are beginning to abandon their own currency altogether and replace it with a stable foreign currency ( " dollarization ", " euro-isation "). In addition, investors holding foreign currency and for risk diversification.

Payments

If someone has currency in foreign currency, these values ​​are not readily available in general and they also drive only limited to meet demands in the local currency. Foreign currency is therefore to exchange in doubt - usually at a loss - before the payment is accepted.

However, foreign currencies can be accepted voluntarily; so it is common for example to accept U.S. dollars in American restaurants in Europe. In some countries, notably with not so stable its own currency, payments in foreign currency are even desirable. Especially in tourist areas is the acceptance of foreign currencies are not uncommon, but it is also often rounded very generous and / or pitched fees on the price. As a rule, the payer receives a change in local currency only, if at all.

Most bank accounts are held only in one currency. This means that unless the currency and debited with fees and are converted at a discount before the bank crediting the account. If a referral is to be sent abroad, this is also connected with fees and unfavorable exchange rates. For this reason it makes sense to manage foreign currency on their own accounts, if you are frequently in these currencies.

Risks

In addition to trade facilitation, it may be useful for economic reasons to own foreign currency. A buyer can hedge by buying a foreign currency when it has suppliers in the country of the foreign currency. A seller can securitize foreign currencies in order to stabilize future payments in foreign currency worth. In both cases, the exchange rate risk is minimized and stabilizes the calculation.

In the accounting by an entity also foreign currencies are displayed. They are accounted for as a rule the balance sheet date to officially determined exchange rate, without carrying out an exchange. The associated therewith exchange rate risk - the reported assets could later less (and more) to be worth - borne by the company. Until after a successful exchange can an allowance be made in the balance sheet.

The euro was introduced, among other things, to facilitate trade within the European Community and the participating countries. For the intra-Community transport money now no or only low fees to pay, the exchange rate risk and exchange losses attributable entirely. Banks in Europe are thus escaped lucrative deals.

Sovereign rights

Foreign currencies are generally subject to the provisions of the currency area in which they are considered legal tender. For various reasons it is not allowed in some cases to possess foreign currency at a specified rate. This can refer to either the state, which the possession of foreign currencies prohibited in his country or cash balances found feeding without replacement; can also refer to the central banks of foreign currency that do not allow the possession of their cash abroad.

Acquisition of a foreign currency

Foreign currencies can be used domestically as well as monetary policy strategy. Is a country 's old currency without a national spare on and instead performs a foreign currency as legal tender, this process is called, depending on the imported currency eg as dollarization or euro-isation. The statutory waiver of a national currency implies that the country in not implement independent monetary policy and also can not generate seigniorage revenue more.

• Euro: Andorra, Monaco ( through monetary agreements with France ), San Marino and Vatican City (both by exchange agreements with Italy), Montenegro and Kosovo
• U.S. dollar (see dollarization ): British Virgin Islands, Ecuador, El Salvador, Haiti, East Timor, Panama, Cambodia, Zimbabwe
• Swiss Franc: Principality of Liechtenstein ( currency by agreement with Switzerland )

Foreign currency account

A foreign currency account (also: exchange account) is a bank account, which is applied at home or abroad, and is performed in a foreign currency. In a plant in Germany after the opening of desired amount in euros is paid, but converted by the bank in the desired foreign currency.

Deposit insurance

The statutory deposit guarantee accesses only for foreign currency accounts, which are managed in a European currency and not exceed a value of € 100,000. Otherwise, the backup using security funds of the banks are. For cooperative banks, the accounts are additionally protected by a fuse Institute.

Risks and Benefits

This form of investment is speculative: On the upside you will make a profit on falling price one has to accept a loss.

In the foreground is the risk of loss due to price fluctuations. In addition, you usually expect higher bank charges. Benefits arise primarily in connection with international transactions that can be handled effectively and easily. In addition, can be achieved by fluctuations a profit. If you think about it take a foreign currency loan, the foreign currency account can facilitate the process and make even more favorable.