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kc135topboom
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US Dollar Weakens Against EU Euro, Again

Thu Sep 30, 2010 3:22 pm

The USD has weakened about 6.7% in September against the Euro. It is currently at an exchange rate of just over $1.36 to each Euro. This could have a significant impact on the KC-X selection in Nov. (or Dec.), increasing the cost of the A-330MRTT bid, while at the same time reducing the cost of the KC-767NG.

http://www.bloomberg.com/news/2010-0...fed-debt-purchase-speculation.html

If this year's compitition follows the example in 2008, then initial contract could be for as many as 69 new tankers, including the 4 SDDs. I know the KC-X will be purchased in USD, but to equilize the exchange rates, the EADS bid would have to be some 30% higher to convert the profits into Euros.

Both Boeing and EADS will have a chance near the first of Nov. to adjust their final bid prices to the USAF, and the exchange rate between the USD and the Euro will have to be taken into consideration before the final selection is made by the USAF.
 
connies4ever
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RE: US Dollar Weakens Against EU Euro, Again

Thu Sep 30, 2010 3:50 pm

Quoting KC135TopBoom (Thread starter):
The USD has weakened about 6.7% in September against the Euro. It is currently at an exchange rate of just over $1.36 to each Euro. This could have a significant impact on the KC-X selection in Nov. (or Dec.), increasing the cost of the A-330MRTT bid, while at the same time reducing the cost of the KC-767NG.

I expect this trent to continue. The USD is weakening due to a very sluggish economy, which may be entering a Japanese-style deflation/stagflation mode, and money moving t chase higher ROIs in China, Europe, and Canada (mind you, Canada can only absorb so much).

I saw Patricia Croft, head of Royal Bank of Canada Investment Services on Tuesday evening, and she is predicting, for example, the the CAN$ will go from the current $0.97 USD (approx) to $1.15 USD (approx) by end of year 2011. This is partly driven by the perception that Canada is in a much better fiscal position than the US, but laso by strong performance in the resource sector, particularly gold & oil.
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Lumberton
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RE: US Dollar Weakens Against EU Euro, Again

Thu Sep 30, 2010 5:08 pm

AFAIK, the RFP did NOT provide protection against exchange rate risk. This (risk) is a huge downside for non-US companies bidding on fixed price contracts. EADS will seek to mitigate that risk by assembly in Mobile, Alabama (at a future point; the company is vague as to "when"), but they can't outsource the production of many of the components, which remain denominated in euros.

Of course they've hedged, but that comes at a (oftentimes) steep cost.
"When all is said and done, more will be said than done".
 
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kc135topboom
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RE: US Dollar Weakens Against EU Euro, Again

Thu Sep 30, 2010 6:47 pm

Lumberton, you are correct, the RFP/SRD does not have protections against money exchange rates. That is because the bids are only accepted in USD and exchange rates are not needed. The contract will be written in USD.

A few months ago, there was speculation that an increase in the USD strenght would benefit EADS, as the exchange rate got down to $1.18 to 1 Euro, IIRC. Now with the dollar weakening against the Euro, that benefit shifts to Boeing.

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