Defining Currency Quotations for EPM Currency Conversion

This topic provides an overview of currency quotations and discusses how to maintain currency quotation methods.

Page Used to Define and Maintain Currency Quotations

Page Name	Definition Name	Navigation	Usage
Currency Quotation Method	CURR_QUOTE_PNL	select EPM Foundation, then select EPM Setup, then select Common Definitions, then select Currencies and Rates, then select Currency Quotation Method	Maintain a currency quotation method for each from currency and to currency pair.

Understanding Currency Quotations

PeopleSoft supports direct and indirect rate quotation, quote units, and triangulation. These are flexible and accurate tools that enable you to convert and manage multicurrency operations.

The currency quotation method controls how a stored rate is displayed and how an entered rate is interpreted and stored in the database. You maintain a currency quotation method for each from currency and to currency pair.

You do not typically maintain rates online for currency pairs that triangulate. Instead, the Cross rate/Triangulation Generation SQR determines the cross rate by using the rates between the from currency and the reference currency, and between the reference currency and the to currency. Currency quotation methods must be set up correctly to yield the desired triangulation results.

PeopleSoft-delivered ETL jobs move currency quotation data from your source transaction system to EPM target warehouse tables. You need only use the Currency Quotation Method PIA page to redefine or modify your existing currency quotation data.

Note: Define currency quotation options before you enter and calculate the rates.

Currency Quotation Method Page

Use the Currency Quotation Method page (CURR_QUOTE_PNL) to maintain a currency quotation method for each from currency and to currency pair.

Navigation

select EPM Foundation, then select EPM Setup, then select Common Definitions, then select Currencies and Rates, then select Currency Quotation Method

Image: Currency Quotation Method page

This example illustrates the fields and controls on the Currency Quotation Method page. You can find definitions for the fields and controls later on this page.

Rate Quotation Basis

Direct

Determine whether you want the rates for a currency pair quoted directly. For example, in converting United States dollars (USD) to euro (EUR), a direct quote would indicate that USD 1 = EUR x.xxxx. In this case, euros are quoted directly against the United States dollar.

Indirect

Determine whether you want the rates for a currency pair quoted indirectly. For example, in converting United States dollars (USD) to euros (EUR), an indirect quote would indicate that USD x.xxxx = EUR 1.

Quote Units

Sometimes called "scaling factors," these preserve decimal position. You can enter any value in this field, although quote units generally are on a scale of 10 (such as 10, 100, 1000).

The default value for this field is 1.

Auto Reciprocate

Select this check box to create or update the rate for the reciprocal currency pair automatically whenever an exchange rate is added or updated. For example, when you enter a new USD to GBP rate, the GBP to USD rate will be updated automatically. You can only apply this feature to currency pairs for which quotation methods have been established.

Note: Currency pairs that triangulate must be classified as either direct or indirect to use in displaying the calculated cross rate. Two fields store the rate conversion factor: RATE_DIV and RATE_MULT. The currency conversion formula is always: (From currency ÷ RATE_DIV) ? (RATE_MULT) = To currency

Triangulation Options

Select the Triangulate check box to have the system convert two currencies through a third currency (the reference currency). Triangulation is used in hyperinflationary environments in which all conversions to the local currency are done through a more stable currency such as USD.

Note: Triangulation was initially used for European countries participating in the euro. However, since 1999 all countries participating in the euro are quoted directly against the foreign currency.

Any countries newly participating in the euro might be initially subject to triangulation, however. The triangulation example below and any other examples in this topic that show triangulation, use a fictional country, with a currency code of NEW, that has just joined the euro. This country is subject to triangulation.

The following are examples of indirect quotation, direct quotation with quote units, and triangulation:

USD 100 to GBP (indirect) = (USD 100 x 1.6) x 1 = GBP 62.50.

CHF 1000 to German marks (DEM) (direct with units) = (CHF 1000 / 100) x 119.335 = DEM 1193.35.

USD 100 to NEW (triangulate) = (USD 100 / 1.25) x 6.8 = NEW 544.

For example, to convert from USD to NEW with triangulation, you perform two conversions:

Convert the USD amount to the reference currency using the appropriate triangulated rate.

The triangulated rate uses the USD to EUR component of the USD to NEW triangulated rate that is stored in RATE_DIV.
Convert the reference currency to NEW using the fixed exchange rate.

The exchange rate uses the EUR to NEW component of the USD to NEW triangulated rate that is stored in RATE_MULT.

Typically, you do not maintain triangulation rates directly. Instead, you process these and all rates through the Cross/Reciprocal Rate Calculator.

Select a reference currency through which the from currency will be converted.

You must consider three exchange rates for triangulated currency pairs:

The rate between the from currency code and reference currencies.
The rate between the reference and the to currency code currencies.
The cross rate between the from currency code and to currency code currencies.

Primary Visual Rate

Select one of the three conversion rates as the primary rate that appears on primary pages and reports.

Cross Rate

Select the Allow Override check box to enable users to override the cross rate for a triangulated currency pair. If this option is deselected, you can change the components of only the triangulated rate.

Recalculate

If you select the Allow Override check box, you must maintain triangulation accuracy by specifying which currency pair the system should use to recalculate if the cross rate is overridden.

Automatic Reciprocation of Quote Methods

The Currency Quotation Method page automatically provides reciprocal methods. For example, if you define the conversion of USD to NEW as indirect, this record is automatically created to indicate a quote method of direct. If you change the quote method on the NEW to USD record, the USD to NEW record is updated automatically.

Note: This example uses a hypothetical currency NEW that has just begun participating in the euro and is still subject to triangulation for an initial period.

Using the conversion of USD to NEW as an example, this table shows each possible field value and its corresponding reciprocal value.

Field	Value (for USD to NEW)	Reciprocal Value (for NEW to USD)
Quotation Basis	Direct Indirect	Indirect Direct
Quote Units	Any valid value	Same value
Rate Decimal Positions	4 (default value)	Same value
Auto Reciprocate	Yes No	Yes No
Triangulate	Yes No	Yes No
Reference Currency	Any valid value	Same value
Primary Visual Rate	From - To (USD - NEW) From - Ref (USD - EUR) Ref - To (EUR - NEW)	From - To (NEW - USD) Ref - To (EUR - USD) From - Ref (NEW - EUR)
Cross rate Allow Override	Yes No	Yes No
Cross rate Recalculate	From - Ref (USD - EUR) Ref - To (EUR - NEW)	Ref - To (EUR - USD) From - Ref (NEW - EUR)