Reducing dow currency risk

Problem: In September 1992, Dow Chemical reacted to the currency chaos in Europe by switching to Euro pricing for all its products in Europe. The purpose, said a Dow executive, was to shift currency risk from Dow to its European customers. Moreover, said the Dow executive, the policy was fairer: By setting the same DM price throughout Europe, Dow's new policy would nullify any advantage that a Dow customer in one company might have over competitors in another country based on currency swings.

Q1. What is Dow really trying to accomplish with its new pricing policy?

Q2. What is the likelihood that this new policy will reduce Dow's currency risk?

Q3. How are Dow's customers likely to respond to this new policy?

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Finance Basics: Reducing dow currency risk
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