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Old 01-07-2022, 07:03   #1
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Conversion between euros and USD during boat purchase

We are buying a boat being sold in Euros and we are paying for it based on today’s US dollar. We won’t be closing until the end of September and by then who knows what the exchange rate will be, but we’re being told it’ll be higher, which could mean a higher cost for us.
How would you go about including language in the contract that you agree to pay asking price (in euros) based on todays exchange rate?
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Old 01-07-2022, 07:36   #2
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Re: Conversion between euros and USD during boat purchase

you just did it. you would have to include a conversion rate in your contract language. Doubt if they will accept the risk.
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Old 01-07-2022, 07:39   #3
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Re: Conversion between euros and USD during boat purchase

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you just did it. you would have to include a conversion rate in your contract language. Doubt if they will accept the risk.


Buy the euros forward.
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Old 01-07-2022, 07:45   #4
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pirate Re: Conversion between euros and USD during boat purchase

To be honest, from what I see the exchange rate is moving in your favour.
This time last year the $ got you €0.855, today you get €0.964..
On current trends if you fix the exchange rate you'll end up paying more than you should.
Ukraine is going to make the £ & € slide further against the $.
But.. Your money, your choice.
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Old 01-07-2022, 07:55   #5
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Re: Conversion between euros and USD during boat purchase

Locking in today's exchange rate is exactly what future contracts are for. I used to do this all the time when buying industrial supplies from foreign suppliers. I negotiated the price TODAY in dollars, and when I was happy with it, I bought the futures contract. What that meant was I traded away any potential upside gain, for the lack of a downside risk.

You can do exactly the same thing yourself on a small scale if you have the cash today that you will need for closing. You negotiate a price in Euros that both you and the seller are happy with, and you take your dollars and buy Euros today, and hold them in a Euro denominated account until the boat closes. You will have fixed your price in dollars, and have no risk if the exchange rate moves the "wrong" way. No upside either, but if you are happy today with the price in dollars, you should still be happy in September.
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Old 01-07-2022, 08:04   #6
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Re: Conversion between euros and USD during boat purchase

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Originally Posted by Claudine View Post
We are buying a boat being sold in Euros and we are paying for it based on today’s US dollar. We won’t be closing until the end of September and by then who knows what the exchange rate will be, but we’re being told it’ll be higher, which could mean a higher cost for us.
How would you go about including language in the contract that you agree to pay asking price (in euros) based on todays exchange rate?
What does the contract actually state?

If you are "paying for it based on today's US dollar", the exchange rate is irrelevant to you. You have a price in US dollars.

Of course, that may not be what you meant as the language in your post isn't very clear.

If the Fed keeps hiking interest rates as they've indicated they will, it's going to be tough for Europe to push the exchange rate back the other way much. Honestly, I would be surprised if it moves more than a percent or two over the next couple months...and it's been trending in your favor. Probably much ado about nothing.

Now if you were on a two year timeframe, I might think differently but now it's very much anyone's guess where the rate will be.
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Old 01-07-2022, 08:17   #7
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Re: Conversion between euros and USD during boat purchase

Quote:
Originally Posted by Claudine View Post
We are buying a boat being sold in Euros and we are paying for it based on today’s US dollar. We won’t be closing until the end of September and by then who knows what the exchange rate will be, but we’re being told it’ll be higher, which could mean a higher cost for us.
How would you go about including language in the contract that you agree to pay asking price (in euros) based on todays exchange rate?
As others have said, you simply name the price in USD. And recite that the settlement will be done in EUR at the mid-market rate of the day of payment.

Doubtful whether a European seller would agree to that, but you can try.


Otherwise, buy a forex futures contract, as others have suggested. Here's a handy summary guide: https://www.investopedia.com/article...ex-futures.asp

Or, just take the risk, which is probably what I would do. Inflation is worse in the US than in Europe, and interest rates are higher. If the interest rate gap grows, then the dollar will go up and you will come out ahead. No one knows for sure, but I guess that's probably the most likely scenario.
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Old 01-07-2022, 08:45   #8
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Re: Conversion between euros and USD during boat purchase

I will only add that unless the person who told you that the exchange rate would be higher in September is a billionaire currency trader, they don't know what they don't know. If one could predict future currency prices with just 55% accuracy they would quickly become billionaires, so if they aren't then they have no more ability to predict the future price then you or I or a random number generator does and they can be safely ignored. As others have said, buy a futures contract or purchase the Euros now if you want to lock in today's rate. You can do either with an Interactive Brokers account for just a few dollars. Or you can become a currency speculator, just go into it eyes wide open that you're doing exactly that.
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Old 01-07-2022, 08:54   #9
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Re: Conversion between euros and USD during boat purchase

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Originally Posted by redneckrob View Post
I will only add that unless the person who told you that the exchange rate would be higher in September is a billionaire currency trader, they don't know what they don't know. If one could predict future currency prices with just 55% accuracy they would quickly become billionaires, so if they aren't then they have no more ability to predict the future price then you or I or a random number generator does and they can be safely ignored. As others have said, buy a futures contract or purchase the Euros now if you want to lock in today's rate. You can do either with an Interactive Brokers account for just a few dollars. Or you can become a currency speculator, just go into it eyes wide open that you're doing exactly that.

Wise words


The cheapest way to do this is to simply open a euro account and just convert the money now, if you have it in liquid form.


You'll get the best rates with a fintech account like Wise or Revolut, which will give you the midmarket rate with little or no commission, saving you thousands compared to a normal bank. I use Wise.
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Old 01-07-2022, 15:30   #10
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Re: Conversion between euros and USD during boat purchase

Purchase contract to state "exchange rate on the day of closing".
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Old 01-07-2022, 15:39   #11
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Re: Conversion between euros and USD during boat purchase

It looks very like the $ is moving towards parity with the Euro. Best hold on and you will probably get a better rate by September.
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Old 01-07-2022, 17:26   #12
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Re: Conversion between euros and USD during boat purchase

We just did this and dollar cost averaged the exchanges utilizing Wise as someone noted above. Has worked brilliantly. We in no way caught the Euro bottom but has worked out just fine. Tons of information in this thread https://www.cruisersforum.com/forums...-243944-5.html

Last page of the above thread details our approach.
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Old 01-07-2022, 23:50   #13
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Re: Conversion between euros and USD during boat purchase

we have just purchased a boat in euro. when price was negotiated and agreed we converted a heap of our home currency (in our case AUD) to euro because the exchange rate was favorable. locked in a good gain

did not convert all as thought there was some more gain to be had, but it's been up and down

no way would seller have agreed to bear the exchange risk. he was selling in euro and expects to be paid the agreed amount of euro

my advice : watch your currency movement...look at the graphs...get an idea what is happening with the exchange...and then make a decision on whether you convert USD to euro now or later.

we use wise or Xe

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Old 02-07-2022, 01:29   #14
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Re: Conversion between euros and USD during boat purchase

You can instruct your US bank to send the funds in Euros by IBAN. This makes the transfer free of charge, but it can take up to 7 days.
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Old 02-07-2022, 01:38   #15
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Re: Conversion between euros and USD during boat purchase

No seller carries the exchange risk.
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