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If you were a Middle East or Far East airline executive, and needed additional aircraft would you buy 777-787 in dollars or air bus in euros?
AirBus still sales it's planes in Dollars
Exactly: And would that be because the dollar is under valued vs the euro?
Well, the Fed could throw a curve by increasing rates .25% at their next meeting and whipsaw all the dollar shorts. We might see some on Wall St sky diving without parachutes. Rerun of 1929. :)
In reality it's hideously complicated.
So the planes are priced in dollars, but built on a cost basis of Euros and dollars. The parts are made around the world (some in the US).
There are hedges being made on both sides for currency fluctuations, and contracts are quietly renegotiated or sweetened or allowed to expire. The contracts are made sometimes years before delivery, and on delivery the machines sometimes are slightly different, for example the A380 weighs 5 metric tons too much in this block, but allegedly meets other standards, so there are adjustments made for lateness and weight which might mask some currency turbulence.
All the while the original contract value to Airbus is flying all over the place, comparatively (sic).
So this is much more than your usual buy oil / sell oil in Euros or dollars. It has time, space, multiple transaction interfaces and hedges. It's weird.
But generally ET is correct (below) for simpler products and commodities.
NR
Wouldn't matter what currency the transaction was in. Dollars and Euros are easily interchangeable. What matters is what currency is held as a store of value (reserve) by the various parties.
This argument about currency denomination has gone around a zillion times. My contention has been, and is being born out by events, that the drop of the dollar will be the cause and not the effect of people abandoning the dollar. In the past few years the dollar has tumbled in a big way and, yet, is still the major reserve currency in the world. Seems we may reach a tipping point soon.
I live in San diego. Yesterday I went to an opening for a new business park in Oceanside hosted by the chamber of commerce. The event was packed with vendors and small business owners looking to ratchet up new business. When I began to look at the businesses that were there I saw service busineses in overwhelming supply, banking interests, web site designers etc., but of the hundreds of enterprises not one manufactured anything.
Are we approaching a zero sum economy?
Chicken and egg. Regardless of how easy it supposedly is to exchange currencies, the relative values of currencies do change over time, and with some visible relationship to relevant events, e.g., interest rates in certain countries, or trade deficits. I think this shows that there is a "supply and demand" issue affecting currency exchanges, i.e., exchange is not infinitely easy. It follows that people will have preference as to what currency they want to be paid in, and that preference will have an effect on the relative values of currencies, and so on around the loop.
To 0th order it doesn't matter what currency it being used. But if there are time delayed aspects in the contract (say maintainance contracts or penalties for underperformance) then the supplier incurs some currency risk if the contract was negotiated in other than its native currency. If say Airbus
had contracted to deliver a plane a year ago for $100M, and deliver it today, they only get $100M. If their costs were in Euros and were not hedged, they could easily go from profit to loss on the deal.