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Wavering Euro Makes Store Owners Do The Math

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Wavering Euro Makes Store Owners Do The Math

Business

Wavering Euro Makes Store Owners Do The Math

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MARY LOUISE KELLY, host:

In this country, the price of fancy cheeses, pastas and wines from Europe are all affected by the value of the dollar relative to the euro. The euro dropped to its lowest level in four years this spring, but it's been climbing recently. The European currency is trading today at about $1.30, up significantly from just a few weeks ago when it was around $1.20.

NPR's Anthony Brooks reports on the impact at a food store.

ANTHONY BROOKS: At Formaggio Kitchen in Cambridge, Mass., owner Ihsan Gurdal offers specialty foods from all over Europe.

Mr. IHSAN GURDAL (Owner, Formaggio Kitchen): Cheeses, oils, vinegars, pastas, chocolates, you name it.

BROOKS: And all for a pretty steep price, but of course that has a lot to do with the value of the euro.

Mr. GURDAL: It's been quite a challenge. And when dollar started losing against the euro, we had got hit kind of a double whammy. Not only it was costing us more to buy European goods, Europeans raised their prices.

BROOKS: Thats because the Chinese were importing large quantities of European milk, which pushed up the prices of European cheeses. At the same time, less than positive economic news here in the U.S. pulled down the value of the dollar.

It's a complicated set of forces that requires some sophisticated strategies for small business owners like Ihsan Gurdal.

Mr. GURDAL: What we did is started to monitor the euro almost daily. And whenever we saw a low drop, we would purchase futures or bid, you know, a large amount of money and try to fix the price.

BROOKS: So 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 wouldnt continue to fall. He says he's lost big money trying to hedge against currency fluctuations like this. But this last time the strategy worked and allowed him to bring some of his prices down.

Mr. GURDAL: The things that would get pass the savings on were things that we're bringing every week - you know, the mountain cheeses, the fresh goat cheeses that comes from France, England, Belgium - things that I know that I have stronger dollar on and I bought futures for it.

BROOKS: As for what to expect in the coming months, Brian Bethune, an economist for IHS Global Insight outside of Boston, says more of the same, which means more volatility.

Dr. BRIAN BETHUNE, (Director of Financial Economics, IHS Global Insight): In fact, the euro was as high as 1.51 and was as low as 1.20. We're probably going to see the euro rebound for a period of time here. But as it gets towards the end of this year, it will probably start to track down again.

BROOKS: But back at Formaggio Kitchen in Cambridge, these price fluctuations dont really seem to matter to customers like Jean Fetchiemer(ph) and Judith Levine.

Ms. JEAN FETCHIEMER: Well, I can tell honestly tell you that I would never notice because when I come here to get things, Im not being a very prudent, cost-conscious shopper.

Ms. JUDITH LEVINE: I buy cheese. I buy bread, salami, a chocouterie, you know, those kinds of items. I do feel Im contributing to the global economy.

(Soundbite of laughter)

BROOKS: But if variations in the value of the euro matter little to them, they matter a lot to small business owners like Ihsan Gurdal.

Did you think that you were going to sort have to be a little bit of a macro economist to do a business like this?

Mr. GURDAL: No, I didnt. And...

(Soundbite of laughter)

Mr. GURDAL: But, you know, you kind of catch up quickly when you take some serious losses.

BROOKS: Gurdal says he feels pretty good about the future, at least until the next round of currency fluctuations.

Anthony Brooks, NPR News, Cambridge.

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