A strong euro relative to the dollar is good for U.S. exports, but it can be tough on small business owners in the U.S.
After dropping to its lowest value in some four years this spring, the euro is climbing against the dollar.
"It's been quite a challenge," says Ihsan Gurdal, who owns Formaggio Kitchen in Cambridge, Mass. The specialty food store sells goods -- including cheeses, oils, vinegars, pastas and chocolates -- from all over Europe.
Lots of Americans enjoy buying fancy food from Europe -- and what they pay for these delicacies is affected by the value of the dollar relative to the euro.
The European currency is currently trading at about $1.30 -- up from just a few weeks ago, when it was trading at about $1.20.
Playing The Global Food Market
It's a complicated set of forces that require some sophisticated strategies for small business owners like Gurdal.
"What we did is [we] started to monitor the euro almost daily," he says. "And whenever we saw a little drop, we would purchase futures or bid a large amount of money and try to fix the price."
When the euro hit historic lows against the dollar, Gurdal contracted to buy about $300,000 worth of foods at that low exchange rate -- in effect, gambling that the euro wouldn't continue to fall.
He says he has lost big money trying to hedge against currency fluctuations like this. But this last time, the strategy worked and it allowed him to bring some of his prices down.
"The things that we could pass the savings on were things that we'd bring in every week," says Gurdal, who was able to cut prices on foods like fresh goat cheese from France, Stilton from England and pecorino from Italy. These are "things that I know that I have a stronger dollar on, and I bought futures on it," he says.
Future Fluctuations
As for what to expect in the coming months, Brian Bethune, chief U.S. financial economist for Global Insight in Lexington, Mass., says more of the same, which means more volatility.
"In fact, the euro was as high as $1.51 and was as low as $1.20 in this past year," Bethune says. "We're probably going to see the euro rebound for a period of time here, but as we get to the end of the year, it will probably start to track down again."
All of which will require continued vigilance and adjustments on the part of small business owners like Gurdal, who says he never imagined that running a neighborhood food store would require him to become an expert on global currency rates.
"But, you know, you kind of catch up quickly when you take some serious losses," he says.
Gurdal says he feels pretty good about the future -- at least until the next round of currency fluctuations.
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