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CORPORATIONS. To them, selling the dollar is mere prudence. A Japanese company may book an order to deliver $1 million worth of steel to the U.S., with payment due in 30 days. Rather than wait to receive the dollars, which by then might be worth fewer yen, the company quite probably will immediately sell $1 million for as many yen as it can get, with the dol lars to be delivered in 30 days. U.S.-based multinationals do essentially the same thing. Hercules Inc., a major chemical company, in 1971 negotiated a five-year loan in Swiss francs, on terms that appeared to be favorable. But by 1976, the dollar had plunged so much against the franc that Hercules had to shell out twice as many dollars as it had bargained for to meet the 7% interest and repay the principal (both denominated in Swiss francs). Ever since, says Peter Petersen, Hercules' European money manager, Hercules has been forced to play the currency-trading game to limit its risk.
Corporate selling of dollars has been speeded up by several factors. Since 1976, accounting rules have forced U.S.-based multinationals to report quarterly — not annually as before — the profits or losses that result from changes in currency values. Many a corporate treasurer comes to the end of each quarter knowing that his company will have to report a heavy loss, possibly because it will have to pay more dollars to settle bills owed to German and Japanese suppliers in marks or yen. The treasurer sometimes will make speculative sales of dollars late in the quarter, seeking trading profits to offset part of the loss.
More ominously, money traders report, selling of dollars has spread to ordinary manufacturing companies in the
American heartland. Says Scaillet: "Ten or 15 years ago, American businessmen were so proud to have the dollar. If you talked about the possibility of a depreciating buck, they would laugh in your face. Now they are frequently more bearish on the dollar than the Europeans."
BANKS. They execute most of the orders for companies and also trade on their own account. An American tourist exchanges $100 for marks at a bank in Frankfurt; the bank can hold the dollars or sell them for other currencies, as it chooses. More important, a French cooperative, for example, deposits in Credit Lyonnais $1 million received from U.S. importers for Bordeaux wine; the bank can sell those dollars for other currencies if it wishes. Banks have a cold-blooded view of the potentialities. Says Jean Bourg, head of the currency department at Credit Lyonnais: "We take advantage of small opportunities [for profits in currency trading] as they arise during the day. We are not interested in trends, but in extremes and how to profit from them."
The orders descend on the cambists — some working in money-trading firms, many employed by banks, a growing number directly for multinationals. Though they work on order, they have some latitude. If a multinational orders its bank to sell, say, $1 million for German marks on a particular day, in Europe it is up to the bank's trader whether to let them all go at once or sell $500,000 in the morning, the rest in the afternoon. In New York, a trader must execute the order at a time and price that the client specifies — and if he accepts an order and then cannot fill it at the price he has quoted, his bank takes the loss.