sandminer....this is a quote where it is obvious where you make a simple mistake:
"Let me try this your way; You start by saying: Oil is US$100 The A$ is 80c to the US$ OK so far, but having received the goods the buyer transfers US$100 into the sellers bank account in Australia. The bank applies the currency exchange rate, crediting the sellers account with A$80 (not A$125)." ---------------------------------------------------
last sentence is where you are going wrong!
the bank applies the FOREX rate and seller gets 125 AUD !!!
(remeber that 1 AUD was 0.80 USD...not other way around)
at parity you get less aussies than at 0.80 (20% less to be exact...) which makes company profit 20% lower with same amount of work)
