ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Because every country does not use the same type of money, international trade requires a system for exchanging currencies between nations. Money from one country must be converted into the currency of another country to pay for goods in that country.

Detailed explanation-2: -Foreign exchange refers to exchanging the currency of one country for another at prevailing exchange rates. Let us take a close look at the meaning of foreign exchange. Different countries have different currencies. Foreign exchange converts the currency of one country into another.

Detailed explanation-3: -The official currency that countries hold as reserve currencies for international trade to and from their countries is the US dollar.

Detailed explanation-4: -You can indefinitely retain foreign exchange upto US$ 2, 000, in the form of foreign currency notes or travellers’ cheques (TCs) for future use. Any foreign exchange in cash in excess of this sum, is required to be surrendered to a bank within 90 days and TCs within 180 days of return.