Understanding Triangulation

Triangulation is the process by which a conversion between two currencies takes place by way of a third reference currency. This process may be used in hyperinflationary environments, where all conversions to the local currency are done by way of a stronger, more stable currency. This process may also be used when a country is undergoing a currency revaluation.

To support triangulation, the PeopleSoft system provides a means to define that you want a currency pair to triangulate through a fixed reference currency. The actual conversion process is done in a two-step procedure in which the from-currency amount is first converted to the reference currency and then to the destination currency, using the appropriate exchange rates. Supporting triangulation also affects the user interface, as there are now two or possibly three exchange rates that are relevant to the conversion. When viewing a triangulated conversion at a detailed level, users access three visual rates:

• A rate for converting the from-currency to the reference currency.

• A rate for converting the reference currency to the to-currency.

• A cross rate indicating the rate that would be required to convert the from-currency directly into the to-currency.

The cross rate in a triangulated conversion is not typically maintained directly. The system enables you to maintain those non-triangulated rates that are components of the triangulated rate, then run a process to generate the triangulated exchange rate. However, you can override the cross rate, which causes one of the other exchange rate values to be recalculated to synchronize it with the overridden cross rate.

For example, suppose an implementation was using triangulation to convert from USD to FRF. You would directly maintain the visual rate from the USD to euros (1.25 in the example table) and rate from euros to FRF (6.8 in the example table). You could then run the EOP_RATECALC application engine process to derive the triangulated rate for converting from USD to FRF. The results are shown in the following table:

Currency Pair	Quote Method	Quote Units	Primary Visual Rate	RATE_MULT	RATE_DIV
USD to Euro	Indirect	1	1.25	1	1.25
Euro to FRF	Direct	1	6.8	6.8	1
USD to FRF	Direct/Triangulate/Euro	1	5.44	6.8	1.25

When performing the actual conversion, applications interpret the visual rates into RATE_MULT and RATE_DIV values based on the quotation method for the exchange, then use the RATE_MULT and RATE_DIV values stored in the Market Rates Data table in the currency conversion formula, either by accessing the values directly or by calling the ConvertCurrency PeopleCode function.

Note:

For information on how a specific application supports maintenance of triangulated exchange rates, see the documentation for that application.