Definition for : Foreign currency advances

Foreign currency advances help finance commercial operations abroad. They are advances granted to exporters of goods and services until the payment date stipulated in the contract. Advances are repaid after receipt of foreign currency linked to the contract. Advances are thus a mode of financing as well as a Currency risk Hedging technique. This instrument is now used less often, because companies prefer to issue Debt in the currency which enjoys the highest Rating. Funds thus raised are then used in accordance with the company's needs in different foreign currencies.
(See Chapter 22 Shares of the Vernimmen)
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