> as lemmas

a. ‘That species of mercantile transactions by which the debts of individuals residing at a distance from their creditors are cancelled without the transmission of money’ (M^cCulloch), by the use of ‘bills of exchange’. par of exchange: the recognized standard value of the coinage of one country in terms of the coinage of another; e.g. (in 1894) £1 sterling at par = 25.22¹/ ₂ francs French money. course of exchange, rate of exchange (see rate n.¹ 5b) (also simply exchange): (a) the price at which bills drawn in the currency of a foreign country may be purchased; (b) sometimes, the percentage by which this differs from par; e.g. ‘the (rate of) exchange has risen from 9½ to 10 p.c.’ arbitration of exchange: see arbitration n. 3.The simplest case of such a transaction is when two merchants in one place are respectively debtor and creditor for equal amounts to two merchants in a distant place. The two debts may be settled by the two creditors exchanging their claims; the process being that one of the creditors draws a ‘bill of exchange’ on his distant debtor, and sells it to his neighbour for its value in present money; the latter sends it as payment of his debt to his creditor, who thus obtains a claim upon a neighbour in exchange for his claim on a person at a distance. In practice the matter is much more complicated, and the term Bill of Exchange has acquired an extended signification from which the etymological notion has almost disappeared (see bill n.³ 9). By writers on the theory of finance exchange is used for the whole system of transactions effected by ‘bills of exchange’, and is formally divided into Inland and Foreign Exchange. But in practice (except in the term bill of exchange itself) the word now almost exclusively means foreign exchange, and in this use has a mixed notion of sense 3; the price at which a bill drawn on a foreign country for a given amount may be bought being subject to variations, depending (1) on the varying relation in intrinsic value between the coins of the two countries; (2) on the varying demand for bills; and (3) on the length of time for which the bill has to run.Economic writers distinguish between the real par of exchange, which is the relation in intrinsic value existing between the coins of two nations, and the nominal or conventional par, which may for convenience be maintained at a fixed level. When the price that must be paid for a foreign bill exceeds par, the exchange is said to be against, or unfavourable to, the country in which the bill is drawn; when the price is below par, the exchange is in favour of that country.