cc1970. now you seem to have a handle on it. See my reply to haveanniceday.
haveaniceday. You're exactly wrong in so many ways it's hard to specify exactly where suffice it to say you have no working knowledge of the subject matter, I, on the other hand, being the CFO of a multinational with vendors located in Taipei Taiwan, Vietnam, Hong Kong come up to this issue on a daily basis and quite frankly it is not rocket science. What I use to lock in the value of a deal in semi-conductors and memory chips is to use Forward Currency Contract which basically is a foreign currency contract to buy or sell a foreign currency at a fixed rate for delivery on a specified future date or period. The trick here is to make sure I have my lead times on delivery of said inventory fairly tight where my MOQ and EOQs are balanced across my MRP time horizon as I am basically incorporating raw material into a final build where I have quoted a fixed price for the final assembly to my customer. Can't go popping him for a foreign currency fluctuation, that's my responsibility and my goal is to make sure my foreign currency exchange gain/or loss for the year is not material to my balance sheet where the balance is disclosed.
Here is a basic definition...
Foreign currency forward contracts are used as a foreign currency hedge when an investor has an obligation to either make or take a foreign currency payment at some point in the future. If the date of the foreign currency payment and the last trading date of the foreign currency forwards contract are matched up, the investor has in effect "locked in" the exchange rate payment amount.
For the most part these are "complex" or "combo positions" in the parlance of FC traders and are actually quoted as a complex spread combining both options to lock a price of the underlying currency. My job is to simply look at the FC chain for the forward month I want to lock in.
Like I said...not rocket science. I'm sure that's exactly what these guys are using for purposes of discussing the deal and the movement of the currency one way or the other cannot be the focal point of deciding a deal.
Just more of a distraction for those who don't know better.
