If the exporter has invoiced in the buyer’s currency, he will be subjected to risk of foreign exchange fluctuations. If the foreign currency depreciates in terms of rupees, exporter will receive lesser amount in terms of rupees or vice versa. In the same circumstances, if the Indian currency depreciates, exporter stands to gain. If the export, bill is purchased or negotiated under letter of credit and the foreign currency undergoes fluctuation, the bank will be bearing the risk.
However, if the exporter has sent the bill for collection, the exchange rate on the date of receipt of foreign currency in Kenya will be given to the exporter. If there is intervening difference in the exchange rate between the date of giving the bill for collection and date of realization, exporter stands to lose or gain, depending on the trend in fluctuation. There will be no foreign exchange risk in case the invoice is made in Indian rupees. In such a case, the importer will be subjected to foreign exchange fluctuation risk.
