EXCHANGE RATES (Ron Akie) Marcia Tuttle 29 Oct 1993 11:59 UTC
---------- Forwarded message ---------- Date: Thu, 28 Oct 1993 09:57:13 -0400 From: Ron Akie <AKIE@FAXON.COM> Subject: EXCHANGE RATES - Reply to Hannah King, Susan Davis (NOTE:This is a somewhat longer version of a response I sent last week directly to Hannah) Sue is correct that more of the large European publishers are moving to setting prices in $US, making the exchange rate issue less important for them. Historically, this is the group that also set a fixed currency exchange rate when they priced in their own currencies, so that all US libraries who ordered within the specified time period (usually at least 6 months) set by the publisher for the fixed rate paid the same $US price based on the fixed conversion rate. The larger (by number) group of publishers outside the US who do _not_ set a fixed rate of exchange are really the ones in question here. These publishers are paid in their own currency and let the $US prices vary according to currency market values. I believe that all agents follow the practice of using the exchange rate in effect at the time that the order is sent to the publisher, not when the library sends its renewal list to the agent. This is the point at which a liability is created; prior to this, libraries can and do cancel the orders with the agent. The publisher, of course, will only recognize the rate that is in effect at the time he receives the order, not when the library sends its list to the agent. Presumably, agents could apply the rate in effect when the renewal is received from the library rather than when the order is sent, but please realize two key points. First, the library could lose on this as easily as gain, since currency values can go up or down. Second, in order to cover the risk inherent in this type of practice (i.e. gambling on future currency values), your agent would have to pass along the increased cost to you. And, if the value of the $US were to sky-rocket after a library sent in its renewal but before the agents sent orders to publishers, would libraries be any happier seeing agents reap these profits? The current practice may not be perfect, but I do believe that it is the least risky one and that, over time, the gains and losses will generally balance out . As for the point about knowing more about how your agent handles currency exchange, I think agents would agree. Over the past decade, as libraries have become more sophisticated about the purchasing process, we have shared this type of information frequently. In the past, Faxon has not noted the exchange rate used on each line of our invoices, mainly due to system constraints, but we have always been able to provide the information upon request, and it is a feature we are adding. Currency exchange is a complex issue and speculating in it is one of the most risky of financial endeavors. Libraries should expect full disclosure of currency exchange practices from their agents, but neither libraries nor agents should leap into the arena of currency speculation, where even the most knowledgable professional can suffer huge losses.