Solving the Currency Exchange Problems

Here is a way to get rid of currency exchange problems. There are a few steps required.
The first step is to allow USA banks to offer accounts and loans in foreign currencies. It would no longer be necessary to convert every currency when depositing it in the bank.
Let's say a factory in the USA gets an order from a Mexican firm for 10,000 circuit boards at 10,000 pesos each. That's 100 million pesos, or about 10,500,000 US dollars. The factory needs to buy materials and labour to complete the job, and needs to borrow for that, some 8 million US dollars. They spend the 8 million dollars, deliver the goods, and get paid 100 million Mexican pesos, but who knows what 100 million Mexican pesos will be worth next month? If the exchange rate drops to more than 12.5 pesos to the dollar, the Mexican payment won't even cover the loan. But if they borrow 76,160,000 pesos, and as part of the same transaction, convert that to 8 million dollars, then they will deliver goods to Mexico for 100 million pesos and repay the 76,160,000 pesos, plus interest, pocketing the rest as profit. The bank collects perhaps 77 million pesos, but what if they've been devalued? That's exactly why they need to offer deposit accounts in Mexican pesos as well. Deposit liabilities denominated in pesos can be backed by loans in pesos. The speculator would deposit money in pesos, accepting the risk of devaluation in exchange for the certainty of a higher interest rate.
The second part of the solution is for banks to allow their customers to exchange currency on-line with each other. Instead of a bank buying US dollars for 9.38 pesos and selling them for 9.62 pesos, or buying Canadian dollars at 0.61 and selling them for 0.68, the bank could allow its customer to bid 9.52 pesos for US dollars, and a customer wanting pesos would buy them with US dollars. After the transaction, the bank would still have the same balance in US dollars on its books, and the same balance in pesos on its books. It's just that 100 dollars is withdrawn from one customer's US-dollar account and deposited into the other's, while 952 pesos are withdrawn from the bidder's Mexican peso account and deposited into the account of the person buying pesos. Both customers get full value for their money. (The identity of the buyer and seller would not be revealed to the other, of course.)
It would be okay for multiple banks to allow on-line exchanges, and the rates would not differ much for long. Let's suppose US dollars are trading at $1.5725 Canadian at one bank and $1.5730 at another. A trader with one million US dollars in each bank would buy US dollars cheap for $1.5725, putting upward pressure on the price, while selling an equal number of US dollars dear at $1.5730, at the other bank, putting downward pressure on that price, until the rates are more equal. Most likely, numerous people with millions of dollars would simply leave their computers on automatic pilot, looking for such opportunities all night long. The banks wouldn't mind, since this adds liquidity to their market, and there's no need to shift US dollars from bank to bank. The trader might have 1,527,550 US dollars in one bank and 472,450 US dollars in the other, come sunrise, for a total of 2 million US dollars still, and each bank opens with the same mix of US and Canadian dollars that it had before, but the ownership of the deposits in each bank has changed.
Banks could allow bids in increments as small as ten dollars, and a bid for 100,000 US dollars could be broken down that small, accepted little by little until it is consumed and converted completely. The computer wouldn't mind. But what about random values, such as cash registers and ATM's produce?
Let's say US dollars are trading at 9.5212 pesos and a greedy dealer wants to sell US dollars for 9.5215 pesos. Such a dealer might put up thousands of US dollars into a "cash register reserve" account, asking 9.5215 pesos for them. Now let's say a merchant wants to offer the fairest exchange rate without risk of exchange fluctuations. A customer brings merchandise to the cash register and the total is $73.22 US dollars. The customer wants to know how much this equals in pesos, so the cashier hits the "Currency Convert" key. The cash register communicates with the bank's computer, seeking the best price, which is 9.5215 pesos to the dollar, and freezes $73.22 US dollars from that trader's account until the deal is either confirmed or cancelled. Maybe the customer didn't bring enough money, or prefers to pay in US dollars. The dealer's $73.22 US dollars get frozen because the merchant has a good-faith prospective buyer of $73.22 US dollars. The cash register replies, 697.16 pesos, and the customer pays, so the sale is confirmed. Then 697.16 pesos get transferred from the merchant's peso account to the dealer's peso account, and 73.22 US dollars get transferred from the dealer's US-dollar account to the merchant's US-dollar account, paying for the merchandise. The merchant then replenishes the peso account by depositing 697.16 pesos from the cash register sale.

This document can be found at http://TomAlciere.com/forex.html

How much is a 100 Pesos Worth in United States