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A Currency Agreement

Where an entity has multiple foreign exchange transactions with the same bank, the counterparty`s risk always lies in the net profit or loss of those contracts, although in this case collateral may sometimes be provided. No Member may participate in monetary agreements or discriminatory practices involving more than one currency, whether within or outside the margins referred to in Article IV or Annex C, or in any of its financial authorities referred to in Article V, Section 1, to operate them, unless authorised or approved by the Fund under this Agreement. Where such agreements and practices are concluded on the date of entry into force of this Agreement, the Member concerned shall consult the Fund on their phasing-out, unless they are maintained or imposed in accordance with Article XIV, Section 2; in that case, the provisions of Section 3 of that Article shall apply. The purpose of a currency swewing is usually to obtain foreign currency credits at more favorable interest rates than when you borrow directly from a foreign market. The World Bank first introduced monetary swepts in 1981 to preserve the German mark and the Swiss franc. This type of swap can be made for loans with a maximum term of 10 years. Foreign exchange swaps differ from interest rate swaps in that they also concern the main exchanges. 8. The nominal value of a Member`s currency, as defined in this Agreement, expires for the purposes of this Agreement when the Member informs the Fund of its intention to denounce the nominal value.

The Fund may object to the termination of a nominal value by a decision taken by a majority of eighty-five per cent of the total voting rights. If, despite the opposition of the Fund, a Member terminates a nominal value for its currency, the Member shall be subject to Article XXVI(2). A nominal value as defined in this Agreement shall expire for the purposes of this Agreement if the Member terminates the nominal value despite opposition by the Fund or if the Fund finds that the Member does not maintain a rate for a significant volume of foreign exchange transactions under 5, provided that the Fund may make such a finding only if it has consulted the Member and communicated to the Member sixty days to the advance within the prescribed time. the Fund`s intention to consider whether there is a finding to be made. Some foreign currencies of developing countries may « bind » their value to other currencies, such as the euro or the dollar. The reason why they do this is to prevent their currency from being dependent on the pressure of supply and demand, on the conditions of the internal market within their own economic system. If the value of this currency exceeds a certain range, the country`s central bank can buy more of its currency to stabilize the value….



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