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Hi, please may I confirm one thing about the spot rates:
Under the US$, the spread is 1.1196 — 1.1222. Currently, because settlement will be made in CHF, therefore CHF will be purchased by selling US$. In this case, 1.1222 spot rate is used. So, when converting US$ into CHF at spot rate, it is US$6,371,419 / 1.1222 = CHF5,677,615.
If the settlement is made in US$, for example, then US$ will be purchased by selling CHF. In this case, the 1.1196 spot rate will be used. So, when converting CHF (assume that my net receipt is now in CHF instead of US$) into US$, I will calculate it as CHF6,000,000 (assumed figure in this example) x 1.1196 = US$6,717,600.
Please may I know whether I am correct in interpretation above? Thank you.
If they are buying US$ then they will use 1.1196. If they are selling US$ then they will use 1.1222.
I do explain this in detail (and the way to remember it) in the first of my free lectures on foreign exchange risk management.
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