Yeah big fluctuations in the xrate are a pain for everyone....except currency traders ..lol:)
There is a trap for importers to get too involved in currency hedging IMO. You have to decide if you business as an importer also includes currency trading.
I'm against hedging for imports, as I believe that I'm an Importer commercialising product and not a currency trader. I set my pricing based on an xrate of 0.72-0.75. When the currency goes to 0.85 I jump in and get some US$, maybe as currency if I have surplus capital , or as future contracts. All depends on my cash flow and future US$ obligations.
I do not pass on exchange gains (i.e. xrate profits above the 0.75 to customers). I try and keep my selling price as steady as possible. Why, well if you dropped your selling price because you are purchasing you imports at 0.95, instead of 0.82....what are you going to do now with the AUD dropping like a stone???
You have given you customers all the xrate gain, and then turn around and pi@@ them off with price increases.
You strategy will all depend on the level of competition in your market; price elasticity of your production and relationship with your cstomers (long term or spot).
Hope I haven't los you so far; thepoint I'm trying to make, is don't base your business model on an xrate 0.85+; look more at 0.75
Good luck..what do you import?
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